MINING FOR PROFITS - SILVER UPDATE

Photo by Florian

THE NO-THOUGHT WAY TO PRINT MONEY
I wanted to revisit the silver and metals trade and check in on our latest call post QEIII that all metals would be awesome.....forever and beyond.  Since Bernanke made his unlimited and unending threat just like Draghi to sterilize and monetize away every bond on the planets, we have suggested that it is quite a good strategy to simply buy metals, watch, and wait.

So far, that mindless and plodding strategy has paid off and we haven't even had to be patient since just one week ago QE has essentially blasted SLV into the stratosphere with an overhead test coming at $35.00

SLV CHARTING (Click on the Chart for a Better View)
http://scharts.co/QGaYV9  - WEEKLY CHART

Let's look at SLV's chart and I'll pull out some items that suggest we are going higher and I'll also highlight points that at least make me believe we'll slow a bit and digest these very short-term gains.

THE BULLISH CASE
First, we note that the QE announcement pushed SLV out of its declining channel which had been holding since the peak in silver of May 2011.

There was a crossover just yesterday on my charts of the 14 Week EMA and the 40 Week EMA AND it was upward sloping.  This is a longer-term indicator of significance and has proven for me to be a powerful tool in making very profitable longer term swing trades.


The daily CCI chart I add to the bottom of my SLV has also shot into wildly bullish territory.  The guy I picked up the use of this indicator from calls this the Crazy-Investor Indicator and it really measures the herd mentality of the market participants.  In this case, when the CCI goes into the "Green" area this is a significant signal that there is real momentum.  You would stay out and not purchase when in the red.

CCI - CHART FOR SLV

THE BEARISH CASE
I see a couple of things on the chart that might cause you to pare positions if you were a shorter term trader in hopes of loading up again in the future.

Overhead resistance at $35.00  There is no doubt that the $35.00 level for SLV has been rejected twice now and this will be the third attempt to thrust through that area.

The green Bollinger Bands I use are set at 2 standard deviations above and below.  Notice how SLV nicely fits in that moving envelope and can only briefly ever plow through these levels.  Obviously trading prices above or below the outer bands suggest you should quickly reduce position or buy and this is why I use them.  In the most recent case, SLV has been hugging the upper Bollinger band and in fact has been outside them for several weeks.  This does leave me wondering if we're a bit overdone in this most recent move.

FINAL SLV THOUGHTS
The $35 level will once again fall and SLV will move higher eventually, but not yet.  In the short-run I do think that all the "good news" is out and we don't have much to look forward to except for the bad stuff (China and Europe slowing more than anticipated).   Headline concerns like continuing short-falls in the periphery of Euroland, Greek elections in October, and the looming fiscal cliff and elections will serve to put a lid on SLV's upward trajectory until we see more inflation information in the coming month.

(EDIT)
CHART OF GOLD
I was looking at a few other charts and so wanted to post this one of gold as well.  Clearly $1800 is strong overhead resistance.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/

CFOs DON'T CARE ABOUT MONETARY POLICY

CFOS ARE LESS OPTIMISTIC
We received a "gift" from the Federal Reserve yesterday that included unending monthly mortgage bond purchases.  I have another post in the works to help examine the decision by the Fed and uncover what the impact will be on the economy and the market.  Before we delve in the Fed action, I wanted to highlight a new piece of information brought to us by the Fuqua School of Business at Duke University.

As usual, I present to you the quarterly release of the CFO Sentiment Survey.  The survey is important because it provides us a global and domestic examination of what CFOs think about the economy and also their own firm's growth outlook.  I like the CFO angle because these company leaders often have a more realistic assessment of true industry and market direction and how that will impact them financially and operationally.  I often suggest that CEOs can't help but spin and sell a positive outlook because they are wired to promote and push and therefore are often glass half-full (or sometimes glass all the way full) and CFOs tend to just look at what is in the glass.

Let's examine what the most recent survey stated.


SEPTEMBER CFO SURVEY - http://www.cfosurvey.org/12q4/PressRelease.pdf
CFOs admitted in this quarter's results that they are more negative than previous reporting periods.  The financial managers suggest that they have curtailed hiring plans and have reduced their spending budgets as well.  The executives also stated that their capital spending plans would not change even if interest rates fell another percent or two, which suggests that Fed policy to lower rates would have little impact on real companies.  CFOs also stated that they would not change any of their investment plans even if interest rates ROSE 1% which further underscores that the Fed's work is not really going to have a material impact in a traditional business environment.  Clearly the Fed is targeting housing and also attempting to provide banks with more liquidity.

TOP CONCERNS
I like the CFO Survey because it also asks the finance chiefs to list their major concerns.  This survey noted that profit margins, health care cost, maintaining employee morale, and finding qualified employees were their greatest worries.  Europe's recession is also an issue on their radar and very importantly we find that companies are concerned about governmental regulations.



DETAILED RESULTS HERE
I've cut and pasted an image here to examine the survey results.  You can see that this quarter's growth estimates have been reigned in significantly.  If you'd like to examine the pdf, simply click this link - PDF OF SURVEY RESULTS

JOBS AND THE FOOLISH FED
Ultimately, companies are slowing their growth and that includes their capital spending and hiring.  While we keep hearing that the Federal Reserve is acting to support "full employment" it seems like that is a "fool's errand".  Company leaders are stating quite clearly that interest rates don't matter and lower or higher rates won't impact their decision to add more headcount!

Recessionary concerns are important as US firms look across the pond and worry about economic slowdowns visiting our shores.  While the Fed continues to try to work magic, domestic firms are trying to figure out how to balance the powerful impact of greater governmental regulations and cost requirements with the ability to actually run their businesses.  FIRMS ARE NOT HIRING BECAUSE THE REGULATORY OUTLOOK AND MANDATED COSTS ASSOCIATED WITH HIRING IS UNCERTAIN.  The Fed can buy mortgage bonds all they want, but until government gets out of the way, regulatory uncertainty will be a critical barrier to employment growth in the next year.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/

ALL IN - ECB PUSHES ITS LUCK

Photo by Phil 

STRONG MOVE
Ok, I admit it, I am one of those people that watch the World Series of Poker on ESPN every year.  It's not because it is good television or even that I like poker, it is simply that I like watching people attempt to win using a number of interesting strategies.  Sometimes players will be loud and almost belligerent, others will be quiet attempting to hide any emotion and even covering their eyes and wearing hoodies, finally others will talk and blab in an effort to throw off their opponent.  The competition is a perfect mix of bullying, guile, and negotiation all in a venue that is shockingly rewarding to the final winner.

BINARY EVENTS
We've discussed how the markets continually are positioned to offer binary outcomes and frankly I hate them!  We face some serious issues this week where the direction of the market will certainly trade based on two huge headline events that happen tomorrow (Sept 12) and Thursday.  First, the German high court will weigh in on the constitutionality of the ECB's measures and determine if there is a violation of the German constitution.  Second, the Fed will meet and the market expects some further market stimulus probably in the form of continued low interest rates, cessation of payments on excess reserves, and more "twisting" by targeting the yield curve and buying specific treasury bonds. It is pretty obvious, if the German courts rules against the ECB's moves or the Fed only partially delivers stimulus in the form of more QE, we probably see markets go down significantly.

DRAGHI GOES ALL IN
As if there wasn't already pressure on the German high court, ECB head Mario Draghi  doubled down in the past couple of weeks and issued statements that the ECB would begin unlimited bond purchases of countries that had yields that "were not reflective" of real market pricing.  In otherwords, the ECB just promised unlimited bond purchasing to manage rates and keep them under the critical 6%, 7%, or 8% level (who knows what really is critical now as 6% was the key rate).

By issuing this promise, Mario Draghi simply pushes all the ECB and Euro's chips into the pot and has demanded that market participants fold in the face of an overwhelming and serious threat.  The question that investors, traders, and speculators must ask is, "Does Draghi really have anything in his hand?"

ROYAL FLUSH OR HANDFUL OF CRAP?
So, despite the back drop of the two headlines this week, the real story is the ECB's head and his promise to save the Euro no matter what.  The bet sounds convincing and seems to have been exactly what markets needed to hear to drive investor confidence higher.  I've read a number of bullish stories that emphatically state that the Euro is saved and there will soon be a rush to purchase fire-sale priced European assets as the fix will stabilize markets and put a floor under them.  The USD and Euro have been trading like it is Draghi's pot too.

So what could lead us to believe that perhaps the ECB Chief doesn't really have a royal flush?  What didn't get much attention in Draghi's announcement is that all of the unlimited purchases would be contingent on the nation receiving aid to comply with full austerity measures and submit to the IMF and ECB conditions.  In otherwords, Spain and Italy will be required to become Greece-like and bow down and implement processes they just haven't been willing and able to do.  In otherwords, Draghi's promise is based on the requirement that distressed nations reign in spending and raise taxes even more.

PUSHING PEOPLE AROUND
In reality then, Mario Draghi probably has nothing in his hand, but he probably was able to win the pot as his competitors don't have a strong hand that would be worth challenging such a bold and overwhelming bluff.  Effectively, the ECB has played a similar hand to what the Fed has and the all-in moves force reasonable players in the markets to simply bow out and hope they can survive and capture a hand on better terms.

Ultimately, sterlization of bond purchases won't do the trick and rates for distressed sovereign nations will get out of hand, but the Fed's and ECB's strategy has nothing to do about winning long term, these players are only interesting in winning the next few hands and extending the game as long as possible.

While I don't think we'll see any shocking news coming from the next two days, I suggest that you review your positions and watch for a continued move higher in commodities and metals.  While we are promised that sterlization and QE hasn't produced inflation we need only look to the charts of gold, silver, oil, and corn to note that central banker promises, bluffs, and all-in bets produce commodity charts that go up and to the right.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/

GOLDILOCKS - METALS UPDATE

AMAZING PUSH HIGHER
Gold, silver, and pretty much all commodities have been on a tear recently.  I had updated a post several weeks ago mentioning that silver was a strong buy and thought that we might see resistance at $31.50.  I never posted that post here on the blog, but put it up on Tim's blog www.slopeofhope.com .  I suggest you visit his site daily.  Anyway, the title of that post was POUR SOME MONEY ON ME - SILVER UPDATE from August 12th.  In the post I suggested that everyone was supportive of the Fed that is supportive of the policies that will push silver and other commodities higher.  With unlimited bond buying promises from the ECB and a Fed meeting on the 13th, the commodities markets went into overdrive and quickly blew through all previous areas of overhead trouble.

Levels on SLV to watch now include $35.50 and $42.50.  Please note, I used SLV, not silver in this chart!

Finally, enjoy this bullish video from Frank Holmes and Jonathan Barratt as they discuss the outlook for gold, silver, wheat, and other commodities.

BIG WEEK THIS WEEK
Key things to watch this week are the German High Court ruling on the legality of the ECB bond-buying actions (Wednesday) and on the 13th, the Fed will come out an stimulate us again.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/

MARKETING WORKS - FOODSTAMP UPDATE

SNAP IS AWESOME!  GET YA SOME!
The government's Supplemental Nutrition Assistance Program has been a powerful success by any measure.  While hard economic times have certainly driven participation in the program in recent years due to the "Great Recession", longer term trends suggest that the foodstamp initiative is amazingly effective at adding to its roles.

The government released June data this month and highlighted that more than 46.67 million Americans are now receiving food assistance.  The new figures show that we have erased the recent drops in participation in February and April and have pushed to new record highs.  We are 3.3% higher than a year ago and 1/2% greater than last month.

DIFFERENT WORLDS?
Stock markets would have us believe that things are better and the outlook much more positive, how can we justify equity index gains and the record participation in government food programs?  We must look only to a massive effort by the last two administrations to drive up enrollment.  The USDA under the leadership of George Bush and President Obama have emphasized participation in the program and we've even had tremendous marketing efforts on television and radio to get the word out that free food is available.  The USDA is spending almost $3 million dollars to get eligible participants to apply for the service in California, Texas, Ohio, and New York.  They are specifically targeting the elderly, working poor, unemployed, and of course.....hispanics (why this group is singled out I have no idea, as if they wouldn't fit in the other highlighted groups??).

TERRIBLE STORIES
The USDA has stepped up its efforts saying that there are more than 1 in 4 eligible people in the US that still haven't applied for the benefits they are eligible to obtain!  Take a look at the video from CNN below.  As I watch this I am simply mortified for this family that they have endured 4 years of struggle.  The frustration they must feel and the shame they obviously feel is terrible as they wouldn't agree to show their faces on camera.  As much as I can empathize with them,  I am also disturbed by the lack of creative thought and noticeable lack of initiative their entire family has shown.  I can guarantee you that the father could start his own small cleaning business or janitorial supply business and earn more than the $18,000 annually the family has made as he labors as an hourly worker.  In addition, I find it hard to believe that the wife isn't working too.

After four years, I would hope that they had improved their situation and I am sure that they do too.  I just almost believe that these "safety nets" have created a group of people that are incapable of being self-reliant and creating their own success.  Clearly they didn't have significant savings as they said they were broke immediately and clearly they have some situation that prevents them from undertaking heroic measures to address their situation (possibly some health issue?).  While I am sorry that the son cannot go to college, I am left wondering why he isn't working and contributing his earnings to his family?  The family has had food assistance, free living (not paying their mortgage), and obviously other benefits too, the question is how will they get out of this mess?  Will they just continue to hope for a corporate job, or will they endeavor to try something new?  My guess is that Obama or Romney won't be able to help someone that clearly hopes to be restored to his previous position and station in life.

SAFETY NETS ARE TRAPS - GOVERNMENTS CREATING DEPENDENCY
Instead of ramping up food program expenditures, I would rather see the government get out of the business of trying to serve more folks.  If a government program must be created, make it mandatory that recipients enter a technical job training co-operative as we continually hear that America lacks skilled labor and jobs at specialized manufacturing plants are plentiful.  I am choking as I'm writing this as it sounds like I'm advocating more government, but it seems as though it is inevitable that the government is going to spend, spend, spend, perhaps it is more reasonable to demand where they are going to allocate it.

The USDA sees lots of new candidates out there and we've seen how effective they are at using marketing to reduce the stigma associated with the lack of desire or inability to provide for basic needs for a family.  I guess we can only predict that we'll see increased role size and more than $80 Billion in annual program expenditures in the near future.  One has to wonder what is wrong with the 85% of the population that isn't using foodstamps, I'm guessing it won't be long till some are enticed to join the program.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/