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CNBC To American People. STFU Already. The US Economy Is On Fire. Plus, Market Update.

 

Apparently the perpetually bullish machine….aka…CNBC is tired of people doubting this “Amazing American Economic Recovery” over the last few years (please see the article above).  That’s right. How dare are those unemployed, underemployed and out of labor pool fools (about 15% of workforce) doubt the American machine of prosperity. How dare are those drunk college kids with $1.08 Trillion debt burden question the validity of their education. How dare does anyone question this real estate recovery.  After all, there is a billion of Chinese millionaires out there buying every house that they can in the deserts of Nevada and California.

Of course, we know better than that. This so called “American Economic Recovery” is an illusion at best. An illusion driven by debt, credit and speculation.   An illusion were only a select few with direct access to free credit were able to benefit from the economic recovery over the last couple of years.  You know, the exact same folks who are trying to tell us that the economy is doing great. Unfortunately, the rest of us were not so lucky.  

Now, a lot of people are starting to concentrate on class warfare.  Yet, we must understand that it is not the class issue, but rather, an economic issue that will impact us all.  No economy can function, grow and excel to the best of its ability if 90-95% of the population is left behind. I am not sure why it is so hard for CNBC, our administration and the FED to understand that.  Now, with my bitching done….

MARKET UPDATE:

2/18/2014 – An interesting day with the Dow Jones remaining relatively flat by losing only -23 points (-0.14%) while the Nasdaq surged higher with a sizable gain of +29 points (0.68%).

One thing we have to keep in mind is that our timing work is based on the Dow. As of right today, our forecast/trading plan presented on Saturday remains in force and in play. I continue to believe that our forecasted turning point will appear as expected. As such, our previously discussed positioning, outlined on Saturday, should remain in place. 

Further, at least structurally the Dow is confirming our turning point. What I am seeing on Nasdaq somewhat confirms the thesis. I am seeing the most speculative issues appreciate in a vertical fashion, including large gaps and everything else. If this doesn’t feel like a blow off top, at least on the Nasdaq, I don’t know what does.  

In summary, my work continues to show that we are close to a short-term turning point scheduled on XXXX. With that in mind, we just have to wait for the market to do its work over the next few XXXX. 

CONCLUSION & POSITIONING:

 (*** Please Note: About 75% of the information contained within this section has been deliberately removed. Particularly, exact dates and prices of the upcoming turning points. As well as trading forecasts associated with them. I deem such information to be too valuable to be released onto the general public.  As such, this information is only available to my premium subscribers. If you are a premium subscriber please Click Here to log in. If  you would be interested in becoming a subscriber and gaining access to the most accurate forecasting service available anywhere, a forecasting service that gives you exact turning points in both price and time, please Click Here to learn more. Don’t forget, we have a risk free 14-day trial).

As mentioned in my earlier forecasts, we are looking at February XXXX as a major turning point.To be exact, this particular turning point is located at…

Date: XXXX
Price: XXXX

Hence, I suggest the following positioning over the next few days/weeks to minimize the risk while positioning yourself for a forecasted market action.

If You Are A Trader: On February XXXX, we will be looking for a confirmation that the market has hit its turning point (as per above) and has reversed itself……on an hourly chart. Once such confirmation occurs, I would liquidate our……….

If No Position: XXXX

If Long: XXXX

If Short:  XXXX

END OF UPDATE: —-Please Note: XXXX is available to our premium subscribers in our + Subscriber Section. It’s FREE to start. 

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CNBC Idiots

CNBC Writes: Stop whining! The US economy is in good shape

Based on current growth dynamics, this year promises an even better outlook for employment creation and America’s contribution to the world economy.

The most recent evidence from survey data indicates that the U.S. service sector (approximately 90 percent of the economy) continues to expand in a steady and sustained fashion. Despite recent distortions caused by bad weather, the same is true of the manufacturing industries, where the capacity utilization rate is approaching its long-term average of 80 percent.

The U.S. economy is underpinned by growing real incomes, increasing employment, record-low borrowing costs and an easing access to credit facilities as banks continue to open up their channels of consumer financing.

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CNBC To American People. STFU Already. The US Economy Is On Fire. Plus, Market Update. Google

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Warning: George Soros Is Shorting The Market. Should You?

No matter what you think of him, when George Soros does something in the financial markets, it typically pays to pay attention.

So, what is he up to? 

As ZeroHedge reports below he is increasing his PUT option position against the stock market and increasing his CALL options position for gold mining ETFs. Let’s explore both positions a little bit further. 

While his bearish position against the market represents a small portion of his overall portfolio, about 11%, it is up significantly since Q3…… establishing a clear upward moving trend. Certainly, a large chunk of it was put in as a hedge against his overwhelmingly bullish allocation. However, I think there is something bigger brewing under the surface. 

George Soros is not stupid. I hope we can all agree on that. He is not about to go and put up a massive short position when the market is in a clear technical uptrend. Yes, he is hedging, but he is also getting ready to go short when the time is right.  I would do exactly the same thing. Test the water at a potential point of inflection (today’s market), feel it out with a small position, go big once the market confirms the downtrend. That’s just proper money management. 

I am certain Mr. Soros understands today’s macro economic environment better than anyone else out there. What he sees troubles him. Massive global credit bubble throughout western economies, emerging markets and China. Substantial asset overvaluation and a general “psychological” setup that shorts can only dream of. In other words, the market is perfectly setup for a bear leg. The bear leg that the market will exhibit between 2014-2017, as per our forecast. 

On the gold side, I am starting to like both Gold and Gold Miners here. From both the technical as well as the fundamental point of view. From the technical side, both are exhibiting signs of stabilization and a reversal. This bodes well with my fundamental analysis of the overall market. As the bear market decimates the US Economy (once again) over the next 3 years (2014-17), the FED’s are bound to keep the stimulus coming. At any cost. Trying to get inflation and dollar devaluation going. Under such circumstances Gold typically does very well. Not only as a monetary instrument of “stability”, but also as hedge against economic trouble.

So, should you short the market and buy gold?  Yes and Yes. The question is…..when? Please log in into your Premium Account to find out the WHEN.  

george-soros-investwithalex

A curious finding emerged in the latest 13F by Soros Fund Management, the family office investment vehicle managing the personal wealth of George Soros.

Actually, two curious findings: the first was that the disclosed Assets Under Management as of December 31, 2013 rose to a record $11.8 billion (this excludes netting and margin, and whatever one-time positions Soros may have gotten an SEC exemption to not disclose: for a recent instance of this, see Greenlight Capital’s Micron fiasco, and the subsequent lawsuit of Seeking Alpha which led to the breach of David Einhorn’s holdings confidentiality).

The second one is that the “Soros put”, a legacy hedge position that the 83-year old has been rolling over every quarter since 2010, just rose to a record $1.3 billion or the notional equivalent of some 7.09 million SPY-equivalent shares. Since this was an increase of 154% Q/Q this has some people concerned that the author of ‘reflexivity’ and the founder of “open societies” may be anticipating some major market downside.

Then again, as the chart below shows, as a percentage of total AUM, the put position rose to 11.1% of his notional holdings. By way of reference, as of June 30 2013, his SPY put may have had a smaller notional value, but it represented both more shares (7.8 million), and was far greater as a % of AUM, at 13.5%.

Finally, remember that what was disclosed on Friday is a snapshot of Soros’ holdings as of 45 days ago. What he may or may not have done with his hedge since then is largely unknown, and since there are no investor letters, there is no way of knowing even on a leaked basis how the billionaire has since positioned for the market.

That said, while the SPY puts are most likely simply a hedge to his overall bullish exposure, perhaps more notable was the $25 million call position that Soros put on the gold miners ETF which has been beaten into oblivion over the past year, in the fourth quarter. Does Soros think that it is finally the miners’ turn to shine?

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Warning: George Soros Is Shorting The Market. Should You?  Google

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Weekly Update & Market Forecast. Very Important Update

daily chart Feb 14, 2014

Weekly Update &Summary: February 15th, 2014

Markets continued to rally throughout the week with the Dow Jones appreciating 360 points (+2.28%) and the Nasdaq gaining 118 points (+2.86%). Structurally, the market did very well, closing all the gaps during the span of the week.  There was a gap left around 15,500 on the Dow, but it will be closed during the subsequent bear market leg.   

Most of the bears who were incredibly excited just two weeks ago are now throwing their hands in the air, in complete disbelief, proclaiming something to the tune of “f$&# this s*&#”. Blaming the FED, market manipulation and everything else under the sun for this unprecedented and powerful two week market rally.  Of course, exactly at the wrong time.

Listen, even though the Nasdaq has set a new all time high, the Dow remains over 400 points below its December 31st, 2013 top.  Plus, we have to take into the consideration the fact that the technical trend is still incredibly bullish. Showing no sign that the bear market has started……as per our claim.

So, what is going on?

Based on my mathematical work, the market is performing just as it should. As I always say, it’s the markets job to confuse, frustrate and destroy as many investors as possible. And that’s exactly what it is doing.  

In my original forecasts in 2013 I have suggested that March of 2014 will be the top of the bull market. That was until I came across a missing piece of data suggesting that December 31st of 2013 was indeed the top. Meaning, as of right now the market continues to trace out the necessary pattern towards its ultimate price and time targets in March of 2014. Yes, a XXXX. 

There is another important point to consider. While it is fairly easy to predict the market over an extended period of time (Ex: 2017 bottom of the bear market) it becomes increasingly difficult to do as the time frame compresses from annual, to monthly, to daily, to hourly, etc…. That has to do with a number of data points an analyst has to consider while working with smaller time frames. Simply put, the amount of available mathematical and cyclical data multiplies exponentially as one begins to narrow down the time frame.

What does that mean? It means that it becomes increasingly complex to predict the market over the short time frames. Not impossible, just more difficult.

Which brings us today’s market environment. We have a number of very important points of force coming up over the next few weeks (described below). Points of force that, at least based on my analysis, clearly outline the market structure over the next few weeks and months. If we are to execute our trading strategy properly, we should be able to walk away with significant gains. All while most other market participants are left behind to scratch their heads in outer confusion. As always.   

Please find the points of force (turning points) and the trading strategy associated with it in the Mathematical & Timing Analysis Section below.  

Fundamental Analysis: 

There has been no change in the fundamental picture. As you know, my fundamental case remains fairly straight forward and clear cut. All stocks and most other markets (credit and real estate) are substantially overvalued due to a massive infusion of credit by the FED over the last few years and pure speculation. How overvalued are we?  

1929-2014-Scary-Chart-021414

Well, during the week there has been a lot of hoopla made about the chart above. Comparing today’s market pattern to the one right before the 1929 stock market crash. Claiming that today’s market is tracing out the same patter, right before the crash.

Certainly, if we look at the chart from the fundamental point of view we can argue that the market is indeed incredibly overpriced and is set for a huge, maybe a  90% huge drop.

Let me just say that the collapse is not going to happen. At least based on my mathematical work. First, comparing patterns between today’s market and the market in 1929 is like comparing oranges to tractors. It is meaningless. One must understand where we are in cyclical composition of the market. And we are nowhere near 1929. If you have to compare, 1912, 1946 and 1981 would be much better options.

Second, simply because the market is overpriced, it doesn’t mean that it is about to collapse 90%. It doesn’t work that way. Remember the market has an internal structure. It is exact and perfect. It always does what it is supposed to do by tracing out its points of force. Any move outside of such points would be equivalent to Earth suddenly jumping into Saturn’s orbit for no apparent reason at all.

The lesson for this week is as follows…..

Even though the market is incredibly overpriced (as per my discussion last week) and even though some patterns “look” similar to the ones leading into the 1929 crash, it doesn’t mean anything. Particularly when it comes to making money through investing and/or trading.  

Macroeconomic Analysis: 

There is so much to report here that I am beginning to think that the entire world is going to hell in a hand basket. From Nikkei shifting into downtrend again, to Spain and Turkey deciding to jointly build an aircraft carrier. Because you know, having hyperinflation, collapsing currency, economic depression and 25% unemployment between both countries is not enough. I am just curious to find out who will control any such aircraft carrier. Perhaps it will be Turkey from Monday to Thursday and Spain from Thursday to Sunday. God forbid if they decide to go into war against each other. My brain is starting to hurt just thinking about this stupidity.  

Then you have a slow down in Germany and EU bureaucrats discussing numerous scams of how they can raise enough capital to sustain the EU. Including a plan to outright confiscate/control savings of EU citizens. No, I am not kidding you. Of course, most of it (if not all of it) is the direct result of an insane monetary policy our leaders have put into action over the last two decades. The idea that we can somehow print our way to prosperity. It only works, until it doesn’t.

Technical Analysis: 

While the overall technical picture continues to remain murky, the resolution should be just around the corner.

Long-Term: The trend is still up. Market action in January-February could be viewed as a simple correction in an ongoing bull market. 

Short-Term: The short term picture shifted from negative to positive. Giving us a technical indication that both the short term and the long term trends are up. Yet, that in itself can be misleading as per our timing analysis discussion below.

Mathematical & Timing Analysis: 

(*** Please Note: About 75% of the information contained within this section has been deliberately removed. Particularly, exact dates and prices of the upcoming turning points. As well as trading forecasts associated with them. I deem such information to be too valuable to be released onto the general public.  As such, this information is only available to my premium subscribers. If you are a premium subscriber please Click Here to log in. If  you would be interested in becoming a subscriber and gaining access to the most accurate forecasting service available anywhere, a forecasting service that gives you exact turning points in both price and time, please Click Here to learn more. Don’t forget, we have a risk free 14-day trial). 

As mentioned in my earlier forecasts, we are looking at February XXXX as a major turning point.To be exact, this particular turning point is located at…

Date: XXXX
Price: XXXX

Hence, I suggest the following positioning over the next few days/weeks to minimize the risk while positioning yourself for a forecasted market action.

If You Are A Trader: On February XXXX, we will be looking for a confirmation that the market has hit its turning point (as per above) and has reversed itself……on an hourly chart. Once such confirmation occurs, I would liquidate our……….

If No Position: XXXX

If Long: XXXX

If Short:  XXXX

CONCLUSION: 

We have an existing couple of weeks coming up. A few major turning points and a number of significant moves. Those anticipating the moves and those who can time them properly will be rewarded appropriately. Once the moves described above play out in full, the market will be set free to continue its next cyclical bear market leg. 

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section. It’s FREE to start. 

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Weekly Update & Market Forecast. Very Important Update  Google

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Why The Market Top Is In and What You Should Do Next – Update

Long Term Dow Structure35

Update: 

The blog post below was published in January, warning readers that the bull market has topped out on December 31st, ushering in the next leg of the bear market. The bear market that will take us into the 2017 cyclical bear market bottom. Thus far, the market has performed just as anticipated. A substantial decline and a bounce.

However, with the Nasdaq hitting an all time high today, the question is…..is my forecast wrong?

No. Here is why. What you have to understand is that every single market and stock will have its own internal mathematical structure and it’s own rate of vibration. My mathematical work follows the Dow Jones in particular. As such, the market structure remains intact and just as we have been forecasting within our member section. In fact, an important turning point is coming up shortly, pushing and pulling the Dow towards the completion of secondary top in March of 2014. Something I have talked about on this blog a number of times.

Exactly when, where and what steps will the Dow take to get there? I highly encourage you to visit this site tomorrow in order to read our weekly update. I will answer most, if not all, of the questions.  

End Of Update…..

In my earlier blog posts I have mentioned that we had a cluster of very important turning points showing up around December 31st, 2013 and January 1st of 2014 (based on my cycle work). Indicating a significant turning point. 

Yet, my mathematical work at the time didn’t confirm. That is until Tuesday of this week. You can blame a simple brain fart or a lack of sleep on my part.  

I have shown the chart above before. To prove to you that the stock market is not random, but quite the opposite, it is exact. Showing you that there was only a 22 point variance over a 16 year period of time. Further, when we take the values on the chart above and do a few simple calculations we get a value of 12,935.

So what? 

Based on my calculations, the move between March 2009 bottom to December 31st, 2013 top on the DOW was exactly 12,836. That is an exact hit with 0.7% variance. With cycle work and mathematical confirmations coming together, I have no choice but to call for a market TOP.  

(***What calculation? You can learn more about it in my book “Timed Value” by getting two free chapters on timing HERE,  purchasing it on Amazon HERE or getting it as a free bonus HERE). 

Now, even though the market top is in, we have to wait for a technical confirmation before taking our short position. Based on my previous experience that is a prudent thing to do. 

What should you do next?

Option #1: If you are in stocks, start getting out and going into cash. Earning 2-5% annually is heck of a lot better than losing 30-40% over the next 3 years (the length of upcoming bear market). Plus, you will have money when the bottom comes to buy some wonderful companies at give away prices. 

Option #2: Profit on the short side. At the same, this will be a very difficult thing to do. The upcoming bear market is unlikely to be directional. My work shows that it will closely resemble the 2000-2003 bear market with a lot of ups and downs. As such, it will be difficult to make money on the short side.

The best advice I can give you is this. Protect and accumulate cash. Once we hit bottom in 2017, the market will start its 18 year bull market.  

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Why The Market Top Is In and What You Should Do Next – Update  Google

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Is The Party Back On? The Stock Market Update

daily chart Feb 13, 2014

***The Market Is About To Turn. What Position Should You Take or Maintain To Maximize Your Gains While Minimizing Risk? Please Click Here To Find Out. 

An interesting day with the Dow Jones up +64 points (0.40%) and the Nasdaq up +39 points (0.94%).

The day started with about a 100 point gap down due to bad retail data. The market rallied right away to close the gap and push further to the tune of +60 points. Turning today’s seemingly regular day into a 150 point rally for the Dow.

As of right now, both the short-term and the long-term chart look exceedingly bullish.  Even though we are properly positioned, extreme caution here is a must.

It seems like the scenario discussed in yesterdays update is in play. While the Dow pushed higher it was unable to break above 16,050 for the time being.  Indicating that the highest range of this bounce leg has been reached and that the market rally is likely near exhaustion.  Whether or not we will see follow through tomorrow, is for the most part irrelevant.  Remember, time is the most important element.  

This works well with our February XXXX day provided in yesterday’s forecast. Making our next update incredibly important. Based on the market actions tomorrow I should have both price and time targets for the top on February XXXX. 

Again, February XXXX should prove to be a turning point of this ………(Would you like to see the exact points of force in both price and time? Plus, what you should do. Please Click Here to +Subscribe to our premium service above. It’s FREE). 

CONCLUSION & POSITIONING:

While the scenario above is highly probable, we must implement proper trading positioning, in case it is not.  Positioning below is as per DOW Jones (not to be applied to individual stocks).

If No Position: XXXX

If Long: XXXX

If Short:  XXXX 

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section. It’s FREE to start. 

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Is The Party Back On? The Stock Market Update  Google

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Stock Market Update. InvestWithAlex.com February 12th, 2014

daily chart Feb 12, 2014

A fairly uneventful and flat day, with the Dow Jones down -30 points (-0.19%) and the Nasdaq up +10 points  (0.24%).

The talk of the bottom and continuation of the bull market continue to intensify. Technically speaking “they” might be right. After all, the long-term trend for the Dow Jones continues to be overwhelmingly bullish.  The correction we have experienced since the start of the move can (for now)be classified as a typical correction. After all, the move from 16,588 on December 31st, 2013 to 15,370 on February 5th, didn’t really break any important levels. According to the bulls we are in the first few innings of a “multigenerational” bull market.

Yet, the bears are ready and hungry. Of course, the fundamental thesis is right on the money.  The rally we have experienced over the last few years has been fueled by credit and speculation. Driving most asset classes (stocks, bonds, real estate, etc..) into an extremely overvalued range.  While most bears point to 2007 top in comparison, anticipating a 50-60% slide over a short period of time, other bears go even further. Predicting a complete 1929-32 depression style type of a collapse where guns, ammo and tuna cans become your best investments.

Who is right?

No one. At least based on my mathematical work. Remember, it is the stock markets job to confuse as many people as humanly possible.  Point being,  my work shows that the stock market will drive both bulls and bears up the wall over the next couple of years. Every time the market dives, vindicating shorts over a certain amount of time and suggesting that the bear market/collapse is now in place, it will then turn around and stage a massive rally. Leading bulls to believe that the bull is back. Rinse and repeat.

The structure of the upcoming bear move 2014-2017 will be very similar to that of January 2000 – March 2003 on the Dow Jones. (not Nasdaq).  That is why proper timing of up and down moves over the next few years will become so incredibly important. Identifying the point of force (turning point) and then riding it up or down in whatever direction it points will yield the best results…..  

(Missing portion. Would you like to see the exact points of force in both price and time? Plus, what you should do. Please Click Here to +Subscribe to our premium service above).

There is a couple of things we have to consider.

1. The Dow Jones left two gaping holes on the way down. All the way up to XXXX. Not always, but typically, the market moves to close such gaps before any directional move (up or down) can take place. Our mathematical work showed that the market topped out on December 31st, 2013 at 16,588. Meaning, the market must close the gaps before rolling over and attempting a sustained bear market move. So, is it going to XXXX over the next few weeks? As of today, it is too early to say due to too many interference patterns, but it is highly probable.   

2. The next important TIME turning point we have is February XXXX. Followed by a number of significant turning points in March. This yields a number of possible scenarios. Most probable of which is as follows…..

(Missing portion. Would you like to see the exact points of force in both price and time? Plus, what you should do. Please Click Here to +Subscribe to our premium service above).

CONCLUSION & POSITIONING:

While the scenario above is highly probable, we must implement proper trading positioning, in case it is not.  Positioning below is as per DOW Jones (not to be applied to individual stocks).   As such….

If No Position: XXXX

If Long:  XXXX

If Short:   XXXX

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section

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Book Formlead Big

Stock Market Update. InvestWithAlex.com February 12th, 2014 Google

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Stock Market Update. InvestWithAlex.com February 11th, 2014

daily chart Feb 11, 2014

What Position Should You Take or What Position Should You Maintain? Please Click Here

Another  very strong day in the market, with the DOW up 193 points (1.22%) and the Nasdaq up 43 points (+1.03%).

As discussed in our weekly forecast, this stock market rally follow through (over the last two days) makes one of our two scenarios obsolete.  Particularly, our  most likely scenario of the Dow Jones reaching 15,071 by February XXXX, before turning around and bouncing is no longer in play. Which shifts us to the secondary scenario. The bounce that is happening right now.

This bounce is an incredibly important move for the DOW in both price and time. Even though the move started earlier than anticipated, it is incredibly important for the structure of the market and our Bear Market Thesis.  Remember, secondary and lower high in March of 2014 is a must before any structurally sound bear market can resume.

How long will this bounce take and how far will it go?

We have a number of things to consider.  First, the last down leg on the Dow Jones left a bunch large open holes going all the way up to 16,400. It would be ideal for the market to close the gaps before rolling over and starting the next bear leg. Further, a move into the 16,400 by March of 2014 would allow us to liquidate the remainder of our long positions at fairly good prices and get us ready for taking a short position for the remainder of the bear market.  

With that said, February XXXX remains an important turning point in the market. Given today’s market action I believe that this turning point will be a halfway point of the bounce and/or the B leg of the correction (if you are familiar with Elliot Wave). In other words, it is likely to be a turning point for a short correction that will retrace a % of the current rally without compromising the bounce.  Thereafter, the Dow should bounce into the XXXX category by March to structurally complete the up move.

That is why a proper trading strategy we have executed so far is so important. While our work can determine exact turning points over the long term, it get a lot more complicated over the short term.  As such, we must always wait for a technical confirmation before taking or reversing a position.

(***Please note, we have made a number of trades within our sample portfolios today. Please log in to your account to review the trades).

Short-Term Projections & Advice:

The next point of force shifted to February XXXX. A likely intermediary top before a correction of the rally from February 5th takes place. Thereafter, the market should…..  (Would you like to see the exact points of force in both price and time? Plus, what you should do. Please Click Here to +Subscribe to our premium service above). 

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section

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Stock Market Update. InvestWithAlex.com February 11th, 2014 Google

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Argentina Is Getting Ready To Default…..Again. Should You Care?

Fool me once, shame on you. Fool me twice, shame on me. Fool me three times and I am a fucking moron. Fool me four times? I just got Argentinized.

That’s right, Argentina is about to default on its debt for the 4th time. If anyone cares, make that 1982, 1989, 2001 and 2014. That is what happens when you elect a crazy woman to be your president. The president who blames banks, grocers and businesses for her economic problems.  The political party that spends lavishly on infrastructure projects it can’t afford and then decides that it is a good idea to redistribute wealth to its lower middle class.  

With inflation surging close to 20%, foreign currency reserves down to a minuscule $28 Billion and the credit-default swaps suggesting an 85% probability of a  default, it’s a done deal. Basically, with the US economic and credit slowdowns just around the corner, it would impossible for Argentina not to default. Take note, France. That what happens when you go a little crazy on the “Socialism” and start killing off businesses.

Should you care? No, not really. At the end of the day no one cares about Argentina.  

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Argentina Is Getting Ready To Default…..Again. Should You Care? Google

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argentinaArgentina: Repeat Economic Offender

How many Argentines does it take to screw in a light bulb?
 
Three: two to grill up meat while the other guy bribes the electrician.
 
That extemporaneous wisecrack has been winning me free alfajores at Miami bakeries for more than a decade now.
 
And why not? The rent may be too high in Buenos Aires, for everything from apartments, to beef, to auto parts. But Argentina doesn’t seem to care. This is, after all, an economic recidivist, having defaulted on its debt in 1982, 1989, and 2001—and it is about to do so yet again even as it still fights jilted creditors over the last reneg.

Argentina’s borrowing costs now stand near a two-year high; its government notes due 2017, which have fared the worst in a basket of 65 emerging markets clocked byJPMorgan Chase (JPM), yield 19.25 percent. That is painfully hard to service when your holdings of foreign currency stand at a seven-year low: $28 billion now compared with $53 billion just three years ago. The market for credit-default swaps suggests an 85 percent chance of Argentina defaulting again within five years.

Buenos Aires allowed the peso to tank 19 percent last month amid at least 25 percent inflation and the widest budget deficit in nearly two decades. Something is about to give.

Leftist President Cristina Fernández de Kirchner this week pointed the finger at bankers, grocers, and her critics in the local press for Argentina’s runaway inflation and withered domestic investment. “We are not going to allow them to continue looting the Argentine people’s pockets,” she vowed in a speech.

Thanks to Argentina’s endowment of agricultural commodities, which have enjoyed a bull run since its last default, Fernández and her late husband (the former president) have doubled government spending from 15 percent of gross output since 2003. That largesse was showered on costly transportation and electricity subsidies and cash payouts to the country’s lower class.

Companies were appropriated and delisted from Argentina’s stock market. Foreign investors fled. Argentina, which used to be an envied emerging market, was recently demoted to a “frontier” economy alongside the Philippines and Ghana. Communication from the Fernández administration has lately slowed to a trickle.

“The situation is a lot more serious than the government is letting on,” says Kathy Lien, managing director of foreign exchange strategy at BK Asset Management in Manhattan. “If we were to see them default in this environment, it would have global repercussions. While the world is very different than it was in 2001, I don’t think other economies will escape without damage.” Lien says she is watching the rest of Latin America, as well as Turkey, where there is also a paucity of foreign reserves.

In 2015, Argentina must pay $5.9 billion of local-law bonds. The government’s present plan of currency devaluation to make ends meet could send inflation jumping above 40 percent, according to Bank of America (BAC) Merrill Lynch analysts Marcos Buscaglia and Jane Brauer. “This,” they write, “would decrease Argentina’s payment capacity, not improve it, and would therefore put the [2015 bond] payment more in danger.”

That prospect, says Lien, would then spawn the game of “who’s next?” on trading floors in London and New York. How would teetering Venezuela—Argentina’s socialist brother-in-arms—continue to service its debt, especially if crude oil prices take a hit? How would that news be received in Brazil, which is grappling with a plunging currency, anemic growth, and capital flight? It all could quickly race up the pyramid to China and its heavily dependent Asian “tiger cub” economies.

Even in this globally promiscuous lending environment, with tiny interest rates seemingly everywhere, Argentina is blackballed from easy access to international debt capital markets. The lender of last resort, of course, is the International Monetary Fund, which would exact the pain of austerity, including popular subsidy pullbacks, to give Buenos Aires the $10 billion-plus credit infusion it would desperately need to function after a default, according to BCP Securities (BCP:PL).

“It’s clear the government there doesn’t really care how it’s viewed by world markets,” says Craig Shealy, an investment banker now working on several deals across Latin America. “But it also doesn’t fully appreciate what it’s setting its people and infrastructure up for.” New business and capital formation, he hears from sources, is drying up dramatically in and around Buenos Aires, as money flees and everyone from financiers to peddlers face prohibitive borrowing costs.

“This,” he says, “is not about the little guy vs. foreign bankers. This is about stifling the guy trying to start a food cart, for years to come.”

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Is China’s Default Problem Much Bigger Than Anyone Thinks?

While on the surface China looks like a shiny example of economic prosperity, in reality, it is a rotten corpse of bad debt. I have written about China extensively in the past. About its economic growth, shadow banking, bad loans, empty cities and speculation in various sectors of the economy. Just ask any taxi driver in China and he will assure you that real estate never goes down. 

In a shocking development, now even the Chinese brokerage houses are coming out with statements like “China’s bond market will definitely see its first default this year,” and “There should be a default in China’s onshore bonds this year”.

Why should we care and what will the impact be? 

Listen, there is no doubt that China will face a lot of economic problems over the next decade. So much so that I fathom it might even lead to some sort of social unrest or even a revolution. Everyone needs a good revolution now and then. With that said, China will do what it need to do in order to keep its economy going. No matter how bad it gets, China will try to paper over any bad debts with more liquidity, shadow banking, off balance sheet entries and so forth.

Will we see a collapse? Probably not, but we will see a lot of defaults throughout the Chinese economy over the next few years. As such, it would be prudent not to have any debt exposure to the Chinese market. 

shanghai

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——————————————————————————————————————Junk Yield Premiums Soar on China’s Looming First Default

The extra cost to borrow for China’s riskiest companies is at the highest in 20 months as soaring interest rates heighten concern the nation will experience its first onshore bond default.

The yield gap on five-year AA- notes over AAA debt jumped 27 basis points last month to 224, the most since June 2012, Chinabond indexes show. Ratings of AA- or below are equivalent to non-investment grades globally, according to Haitong Securities Co., the nation’s second-biggest brokerage. The similar spread in the U.S. is 403 basis points, Bank of America Merrill Lynch data show.

The failure of coal companies to meet payment deadlines for trust products has increased concern over debt defaults, with the equivalent of $53 billion of bonds sold by renewable energy, construction materials, metals and mining companies due in 2014. A report on Jan. 30 signaled China’s factories are contracting for the first time since August amid signs of financial stress including mounting losses and bailouts.

“China’s bond market will definitely see its first default this year,” said Xu Hanfei, a bond analyst in Shanghai at Guotai Junan Securities Co., the nation’s third-biggest brokerage. “The economy is slowing while the government seems still confident about growth, which means the authorities probably won’t announce any measures to avert the slowdown. This is the worst scenario.”

Financial Panic

A further $21 billion of securities in those three sectors mature in 2015, the Bloomberg data show, with companies including Baoshan Iron & Steel Co., China Minmetals Corp. and Wuhan Iron & Steel Co. among the most indebted. Bonds of steel and coal companies are under added pressure considering the government’s campaign to reduce smog, and industry overcapacity, according to Moody’s Investors Service, which has a negative outlook on both.

LDK Solar Co. is looking at ways to restructure obligations on its offshore yuan debt after missing payments on its dollar debt last year. Zhuhai Zhongfu Enterprise Co. (000659), a manufacturer of beverage packaging, said on Jan. 28 its 2015 debentures may be suspended from trade after its estimated net loss was as much as 450 million yuan ($74.2 million) in 2013. The yield on the 5.28 percent notes has climbed 217.5 basis points this year to 18.76 percent, exchange data show.

Steel, Shipping

The world’s second-biggest economy slowed in the fourth quarter to 7.7 percent from 7.8 percent in the previous three months as Premier Li Keqiang drove up money-market rates to encourage companies and local governments to deleverage.

China’s central bank signaled in a Feb. 8 report that volatility in money-market interest rates will persist and borrowing costs will rise, further underscoring the risk of defaults which could weigh on confidence and drag down growth.

China Credit Trust Co. reached an agreement last month to repay bailed-out investors in a high-yield product whose threatened failure spurred concern bad debts will rise in the nation’s $1.7 trillion trust industry.

The gap between top-rated and lower-rated bonds in China may widen further this year as news about possible defaults shakes the market, according to Cheng Qingsheng, an analyst at Evergrowing Bank Co.

“There should be a default in China’s onshore bonds this year,” Shanghai-based Cheng said. “Privately issued bonds have higher default risks than publicly traded bonds.” A first default may happen in the steel, coal, shipping or photovoltaic power industries, Cheng said.

Default Swaps

As default concerns escalate, the cost of insuring the nation’s debt against non-payment is rising. China’s credit-default swaps have increased 13 basis points this year to 93 as of Feb. 7. Theyuan fell to 6.0646 per dollar on Feb. 7, the lowest level this year. It was little changed at 6.0605 as of 10:32 a.m. in Shanghai.

There have been no defaults in China’s publicly traded domestic debt market since the central bank started regulating it in 1997, according to Moody’s.

Local governments have helped some companies avert missing payment deadlines, according to Yao Wei, the Hong Kong-based China economist at Societe Generale SA. CHTC Helon Co., a fiber maker which used to be called Shandong Helon Co., repaid 400 million yuan of notes in April 2012 even as it failed to make loan repayments.

Shanghai Chaori Solar Energy Science & Technology Co. (002506), which averted default on an interest payment last year and had just 618.7 million yuan cash as of September, will pay 898 million yuan of debt in March, according to Guotai Junan. The solar-panel maker’s debt-to-asset ratio was 90.1 percent at the end of the third quarter, according to a company financial report released Oct. 27.

High Cost

Other companies are receiving help from related entities. Changzhou Wintafone Chemical Co., a maker of herbicides and insecticides based in the eastern province of Jiangsu, said last month it’s stopped production and can’t repay notes due in March. Changzhou Qinghong Chemical Co., the note’s guarantor, repaid 36.9 million yuan on its behalf on Jan. 17.

A first default may be avoided if local governments continue to step in, said Beijing-based Yang Feng, a bond analyst at Citic Securities Co., the nation’s biggest brokerage.

“The cost of a default on a bond would be very high,” said Yang. “If a company in Shanghai defaults, it would be difficult for every company in the city to raise money.”

Turning Cautious

The yield on AA- rated five-year corporate bonds climbed 13 basis points last month to 8.38 percent. The rate on the benchmark five-year government bond dropped 24 basis points to 4.22 percent over the same period.

The average yield on high-yield Dim Sum bonds, or yuan-denominated notes sold in Hong Kong, has climbed 14 basis points this month to 5.66 percent on Feb. 6, the highest since October, according to an index compiled by HSBC Holdings Plc. Yields averaged 5.52 percent on Dec. 31.

U.S. dollar-denominated 13.25 percent notes sold by Glorious Property Holdings Ltd. (845) in February last year and due in 2018 were yielding 19.61 percent on Feb. 7, Bloomberg-compiled prices show. The company’s chief executive officer and chief financial officer resigned last week, less than one month after shareholders rejected an offer by Chinese billionaire Zhang Zhirong to take the developer private.

“Investors have turned cautious on high-yield bonds,” said Guotai Junan’s Xu, who forecasts China’s economy will grow 7 percent this year. “Since China’s onshore bond market hasn’t had a default, the market may not have priced in all the risk it should have.”

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Weekly Stock Market Update. InvestWithAlex.com February 8th, 2014

2/8/2014

daily chart Feb 7, 2014

Continue to maintain a LONG/HOLD position -OR- In CASH .

Weekly Summary: 

Quite a volatile week. We started off with a massive drop on Monday, subsequent stabilization and a rally towards the end of the week. When it was all said and done the Dow Jones gained 95 points (+0.61%) while the Nasdaq gained 22 points (0.54%).  The volatility is back and that’s a good thing. Structurally, the market did very well, leaving only one gap unfilled. That was on Thursday (around 15,500) and it is highly probable (based on my work) the market will go back to close this gap next week.  

The question on everyone’s mind is…..

Is this correction over? Can we get on with the bull market?

Not so fast. As I have indicated many times on this blog already, the Dow Jones topped out on December 31st, 2013 at 16,588. My mathematical analysis and work confirm that. What we are witnessing right now is the first stage of the bear market that will take us into the 2017 bottom. Again, the structure of the upcoming bear market move will be very similar to the bear market move between January of 2000 and March of 2003.

In short, a lot of volatility, a lot of violent ups and downs and a general downtrend that will take us into the 2017 bottom. Such internal market structure will make it very difficult for all (longs, shorts and traders) to make money in this market. You only have two options.

First, you can simply go short for the duration of the move. But only after the bear market is confirmed. If that is not exciting enough, you might want to concentrate on timing bull/bear moves over the next few years to maximize your returns. BTW, that is exactly what we specialize in here. Please check out our +Subscribe section.

Thus far, our model portfolio (within our premium section) has been in cash @ 10 Year Note, helping us avoid the decline while we wait for a bear market confirmation. Otherwise, I recommend people to maintain their LONG/HOLD positions.  

Remember, there is vast difference between proper or exact timing and smart money management.   

Fundamental Analysis: 

There has been no change in the fundamental picture. As you know, my fundamental case remains fairly straight forward and clear cut. All stocks and most other markets (credit and real estate) are substantially overvalued due to massive infusion of credit by the FED over the last few years and pure speculation. How overvalued are we?  

market to gdp

The chart above is just another data point we can use in our analysis and comes to us via courtesy of Dshort.com. The chart essentially indicates that today’s overall market valuation is above 2007 valuation levels. Looking back, we know that valuation levels at 2007 were extreme and subsequent collapse to the tune of 60% proved that without a shadow of the doubt.

While we have already surpassed 2007 levels, the market is still below 2000 levels. Does that mean you can breathe a sigh of relief? Not in the slightest.

Here is why…..

Speculative levels of 2000 tech bubble were caused by simple speculation in the tech sector and subsequent excesses throughout the economy/markets. Today’s valuation excesses are caused by massive infusion of credit. When we take that into consideration, I would argue that today’s valuation levels (once again, driven by credit) are higher than 2000 valuation levels. When the credit is finally withdrawn or becomes ineffective, both occurring simultaneously in today’s environment, the valuations are bound to collapse.    

Macroeconomic Analysis: 

An interesting week. Both Ukraine and Argentina are putting capital controls into their markets, indicating an upcoming economic collapse in both countries. A number of economist came out blaming “Emerging Markets” for market instability within the US. Of course, they are once again wrong. It is the not the Emerging Markets that are causing problems throughout the world, but the US Economy and the end of the credit binge that is causing all sorts of problems. It simply being felt more prominently in a weaker emerging market economies. That will soon change.  

Japan continues to try spark its economic growth through monetary intervention, currency devaluation and angering menstruating women.  All idiotic moves leading to an eventual disaster.  The UE bureaucrats continues to pretend that everything is fine by offering Greece further extensions in hopes that Greece will pay them back. I think it’s time for the EU to admit that it is never going to happen. In fact, they might as well usher in the unavoidable and the unthinkable. Greek default.  

Technical Analysis: 

While the overall technical picture continues to remain murky, the resolution should be just around the corner.

Long-Term: The trend is still up. Market action in January-February could be viewed as a simple correction in an ongoing bull market. 

Short-Term: Even though the market bounced from Tuesdays lows, the short term picture remains down. Please see my timing analysis for further instructions. 

Overall, we must wait for a confirmation before taking a short position. 

Mathematical & Timing Analysis: 

We have two possible scenarios playing out.  

As mentioned in our daily updates, my mathematical timing work indicates a significant turning point on February xxxx with the initial price target of xxxx. As of right now, I believe the bounce we have experienced over the last few days is just that, a bounce. As such, I anticipate the market to roll over early in the week and continue its bear move to hit the price/time targets below.

However, in case we do get a follow through of the current rally early next week, I would have to adjust my view and call for a top (instead of a bottom) on February xxxx. If this scenario comes to fruition we might be at an important juncture of bear market confirmation. As such, the first few trading days of the upcoming week is incredibly important.  

Time Targets: xxxx

Price Targets: xxxx

CONCLUSION: 

If you are out of the market as we have been, stay out. If you are still fully invested consider liquidating your positions as we go through a rebound over the next few weeks. Once the rebound plays itself out and the market confirms the next bear leg down, I would recommend going short at that time. 

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section

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Weekly Stock Market Update. InvestWithAlex.com  February 8th, 2014 Google