Dang, I should be out of the office more often. Looks like the “Dollah Dollah Bill Y’awl” prediction I made yesterday is staying true and we are continuing to see a break down in the much beknighted green back– [[UUP]] .
The dollar’s breakdown is causing a “so sorry” event for bears, but a “yippe kai yi yeah, muthaflickah” event for those of us in the precious metal camp. What’s ironic is that the bears are correct — the only thing keeping this market going right now is the craptastic dollar. In other words, it’s not “real” value but “inflated value” that’s driving stocks upward. What is doubly ironic is that bears will short this market thinking that the dollar will strengthen.
Very odd.
We’re here to make money so let me throw out some picks that are looking good. First — the junior golds, which on the Jackson side include only Eldorado Gold Corporation (USA) [[EGO]] , which is my strongest Jackson today. Non Jacksonian juniors I like, and will mention again are Allied Nevada Gold Corp. [[ANV]] (which is breaking out as I type this), Golden Star Resources Ltd. (USA) [[GSS]] , [[BAA]] , NovaGold Resources Inc. (USA) [[NG]] and Northgate Minerals Corporation (USA) [[NXG]] on the gold side and Silver Wheaton Corp. (USA) [[CDE]] and [[EXK]] on the silver side. I also like the double silver ETF [[AGQ]] here as well. Finally, the Jackson silvers are looking strong here as well — Silver Standard Resources Inc. (USA) [[SSRI]] , [[PAAS]] and [[SLW]].
Non-PM Jacksons Teck Cominco Limited (USA) [[TCK]] and Thompson Creek Metals Company, Inc. [[TC]] continue to look great while agro man The Andersons, Inc. [[ANDE]] takes a breather. Still a buy as well, though.
From a non-Jackson picks side, [[BIOS]] is getting knocked back today, but it’s still on trend by a long piece, so look to add. Also , the rockets I gave you the other day — Trimble Navigation Limited [[TRMB]] and Given Imaging Ltd. [[GIVN]] , are flagging here and if they begin to take off from the bottom of these flags (instead of breaking down), they too could be a nice purchase here. Use caution and mind your sizing with these big movers. Best to you all, and look to the PM’s if the dollar continues to deteriorate.
UPDATE: I almost forgot to throw something in on Rage’s regional banks play. Of those I like Fifth Third Bancorp [[FITB]] and KeyCorp [[KEY]] . Somewhat related — I also like the Irish shilelegh-wielding banks too — Bank of Ireland (ADR) [[IRE]] and Allied Irish Banks, plc. (ADR) [[AIB]] .
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Well Jake, at least you got half of want you wanted (mb more), but no dollar rally. I am goin’ to borrow Jim Willie’s line and draw one at EUR/USD ratio at 1.43:1.
That happens and PM’s are goin’ fawr.
I didn’t want a dollar rally, that was Cash ‘n Guns… I was being sarcastic the other day.
Sometimes gold rallies with the dollar, though… check the historical charts.
Interesting, but I am thinking such a combination of rallying is unlikely, unless the entire globe decides to start printing their currency at twice their respective GDP’s, not that some Gov’ts aren’t trying. But, if you were a foreign creditor, would YOU want to buy more US debt? The smaller holders are bailing in droves, and the big players are beginning to play ‘chicken’ with one another.
On my way back from overseas last September I had to switch flights in Minneapolis airport, right when this shit sandwich really started to get passed around. I asked an American I met there what he thought of paying another 6 large (low-balled the estimate. It seemed like it would be close at the time.) to bail out Wall Street for it’s incompetence. He said, “What else can we do?”. I told him, ” Put your currency back on the gold standard…” He gave me a funny look and edged away from me to watch the disaster unfold on another screen.
Hi Jake,
Can you elaborate on TBT a little? I don’t understand why its getting pounded as the dollar gets crushed? I know that you used to like it a lot, and i’m wondering if you are still interested in it now that it is off 20% or so from its highs.
Thanks,
Ben
Still very much interested. TBT is a Jacksonian, that means it’s a long term play. It’s going to get pounded when people are buying the ten year (like today) but I think long term wise, the ten year (and all US debt) is toast.
That’s the thesis, at least.
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Thanks Jake
I wasn’t expecting this at all right now. In fact I just bought HBAN and CPST (following RC and CA) with my trading money, thinking I had a few months before putting it in PM’s. Not that I need anymore PM’s, but…
Did you see SGY? I am long that one, thanks to IBC. How nice was that today?
Anyway, should be interesting next week. Holding my two trades above at least until Monday, and am curious of your thoughts on TBT, like Ben.
Holding PTM as well, still. Considered selling as I was tired of looking at it in the red, but I still think it is a hold, just don’t know how long until we see some upward movement there.
I personally am still liking TGB and bought more yesterday.
Sold TRID when it popped a little, and really am disgusted with TIE, but holding as I am not taking that big of a loss on it just yet.
Probably way too much info, but hey, it’s Friday.
Oh, and I made some money in Seattle Genetics (SGEN) this week. Got out with a pretty big profit, so am really proud of myself for that one, as it was my own pick.
PTM is even more of a buy and hold than TBT, although I say that only because PTM will be less volatile than TBT, a double ETF, just by their respective natures.
I don’t have a TON of PTM yet, like I do with my gold and silver plays… I don’t know what I’m waiting for, but I am still on my “starter position” there. Maybe when it breaks $16 I will get the rest. Until then, I’m not too worried about platinum, frankly, unless the whole commodity cycle gets trashed in a last ditch deflationary spiral before the megaflation.
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I still have a little bit of TIE to keep an eye on it, but it’s not a favorite like TCK and TC. You should trumpet your picks (SGY and SGEN) here more often! 😉
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One last pick I’ve been showcasing in the PPT but not as much here (do to it’s speculative nature) has been CAR, which just broke to new highs today.
In fact, it’s looking a lot less speculative than BIOS!
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BIOS? BIOS? Did someone say BIOS? Short that pig!
Hey Jake, am I correct in assuming that you are a long term gold bull and that you are a bull because of the impending dollar collapse, inflation rocket, and commodity explosion? If you answered “Why, yes Alvari” to that question, then what are your thoughts about being long currencies in commodity driven economies like Canada and Australia? How else can we benefit from the end of days? BTW, I have 20oz of the hard stuff in my safe deposit box.
is it impossible that the dollar trades with the market?
Only in healthy economic environments.
This ain’t one.
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Lung Sac – I like your thinking, but am not a big fan of the currency trade, being a “hard money” guy.
I would rather buy the blue chip names in those countries, like BHP, for example.
See “j” – the Aussie correspondant on Fly’s blog, for more on the currency trade. He actually does that for a living.
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Friday night watching Sponge Bob with Boo Boo, waiting for the Yankees game to start and commenting on Jake’s latest post. Ain’t life grand! Oh yes, I left out dodging the tornado part of the day.
Regarding PTM, wouldn’t that trade more based on the industrial usage of Platinum? Maybe, just maybe, this junkers for clunkers really will kick start auto sales bump production and we could start the climb back up. Now what do we do with the other $697 Billion of stimu-pork? Can we get bring it back and get refund since we didn’t need it?
BTW, nice job on the EGO. It was my best performer today. Thanks.
You’re welcome. The sad thing about “cash for clunkers” is that it is actually probably the most successful piece of stimulus the idiot Dems have engineered, and its one of the smallest.
The idiocy is in their deciding to apportion what is in effect a very specific tax break instead of allowing the general public to take those decisions themselves.
Idiocy and unfairness… “When does my industry get its kick start?” asks Joe Citizen.
The fact is if most of the “stimulus” was a simple tax cut instead of a Dem decided apportionment (inefficient, slow moving, ill-chosen), we’d not have been reporting negative growth again today.
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…also, people are worried about GM’s and Chrysler’s ability to back their product …and foreign brands have higher fleet mpg. So the program is disproportionately beneficial to foreign brands.
Anyway, this little program is just another example of our propensity to borrow from the future in order to consume today – – and Jake, after 8 years of Bush doing exactly that (borrowing and spending), you shouldn’t color it as a Democrat problem, it is an American problem.
But borrowing from the future is the entire point of stimulus. That’s my point. The “stimulus bill was seriously broken by the President allowing the bill to get out of control and become a package of 10 years of backlogged “stuff” that congress wanted. The bill could have been simple and targeted to the task at hand. I’ll start with C for C:
1) “Cash for clunkers” Applied to any car over 10 years old currently registered, etc. towards the purchase of a new car. That’s it. We already have CAFE standards etc. No need to pile on AGW remedies onto stimulus. Benefits: a) If we assume the current $4,500 benefit and average $45,000 new car price we get 10:1 leverage, not counting the fact that the majority of times the remainder of the purchase price would be borrowed from a bank, credit union, or financing unit of the auto maker. b) Tax receipts for state and local municipalities increase immediately and in the future. Sales taxes are paid to the states immediately and personal property taxes to the local municipalities for the life of the car. c) GM, Chrysler, Ford, and yes the foreign transplants, sell more cars, maybe avoid bankruptcy. They certainly would sell more than 10 million cars per year. Cost: $10 Billion.
2) Suspend payroll taxes for both employer and employee (FICA and Medicare 15.3% total employer and employee rate). In 2008 approx 900 Billion (source: Taxpolicycenter.org). Cost $150 Billion for first 2 months. Total cost for 4 months $300 Billion. Benefits: a) Employees immediately get a 7.65% raise to spend as they see fit. b) Employers immediately get a 7.65% raise to spend as they see fit. c) State and local governments collect sales taxes on increased sales. Cost $300 Billion.
3) Targeted Home purchase credit (David Kelley’s idea) $10,000 credit to purchase a home during the current quarter . Credit would decrease $2,000 each month it was not used after the first quarter. Cost $10 Billion. Benefits: a) clear out unsold inventory.
That’s it. Total cost:$320 Billion. Instant juice. Downside: It increases the deficit, but ANY stimulus would. Benefits: It’s instant on. and could be turned off either when the money runs out or when economic activity picks up.
ALL of the other “stuff” could be dealt with as normal business of the nation. Infrastructure, bridges, power grid, etc. It’s not stimulus, it’s just spending, because it takes too long to get into the pipe. How much, etc. is a discussion for another day.
@Purdy — yes, Bush pushed up deficits as well, but nothing like what we are seeing with the planned Obama spending over the next number of years.
As well, you have to remember, deficits (and debt) are most accurately measured as a percentage of GDP. If we have rapid growth, we can accomodate additional debt (much like a company can)…. but if we are encumbered by higher taxes and other impediments on the producing part of the economy, then growth will slow to the rates seen in welfare states like Europe, and our debt levels will become unsustainable. We will see the return of the legendary “stagflation” of the seventies.
Call me pessimistic, but I think that by the end of Barry’s first term, even Republicans will be thinking back on Jimmy Carter more fondly.
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Jake – You could be right about the outcome. I’m less pessimistic, but only because I think we can get an initial boost to growth in spite of the deeply flawed stimulus package, that may turn into longer term growth. I also have a stupid optimistic streak about our country’s ability to grow and remake the economy despite politicians best efforts to screw it up.
I think you nailed the greatest risk: too high taxes needed to service the debt and entitlements (social security). It’s like trying to drive the economic car with the parking brake pulled up tight. The car will move, but it’s not very efficient.
I think the 2010 election may push the President back towards the center. I’m not waiting that long. I’m still adding to my Jacksonian portfolio.
” In other words, it’s not “real” value but “inflated value” that’s driving stocks upward. ”
Jake, what would you need to see for you to label it as “real value” ?
the dollar and equities both rally?
Thanks
Felix — exactly. In other words. If a dollar is worth a dollar today, but worth 90 cents tomorrow, then my equity hasn’t really appreciated in real terms if it’s up 8%. In fact, it’s lost ground.
FYI — a goodly portion of the 2003-2007 “bull” was dollar depreciation.
We’ve still not gotten out of the secular bear market that started in 2000, and with these gov’t expenditures and higher taxes, it’s not likely we’ll be reaching escape velocity any time soon.
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Why are long rates going down?
Long rates rose when there was a bad short-term auction and then sank relentlessly last week when there was a good 7-year auction. This makes sense if the view of market participants is swaying more towards the deflationary side of the ongoing debate.
But at the same time as these long rates were sinking, stock rose and held gains and gold rose too, indicating that the inflation trade is still on.
WTF??
Quantitive easing. The center will not hold, as this policy depends on our trading partners holding our debt.
I just don’t know how long they’ll stand for it. Right now, they have to. Not for a whole lot longer if our consumption continues to suck eggs.
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Aside to Purdy — I still “LOL” every time I see that avatar… is that Chris Elliot??
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The only thing that reconciles these apparent discrepancies is massive intervention by non-traditional market forces: governments.
Could one or more of our creditor countries be systematically converting their dollars to real stuff and US stocks – even while continuing to support our debt?? That’s what I would do were I them and that is my working conspiracy theory until I hear a better one.
Also, if massive amounts of dollars were being converted to stuff, shouldn’t one of the tells be a weakening dollar?
Indeed, unless the prices of PM’s have been for decades/are being now artifcially supressed, keeping the value of the dollar’s value (when compared to them) bullshittingly high.
Inflation alone since 1971 will show you that, in fact, the USD has been and continues to be weakening. But the ‘penny is dropping’ as they say, and now the greenback has been pushed to the edge of a precipice (about to lose its virtual monopoly on international ‘reserve currency’ status), and current US monetary policy seems to be oblivious to just how hard it is shoving in the direction of free fall.
I don’t think you are onto a ‘conspiracy theory’ at all. I think you have a PURDY good sense of which direction the wind is blowing.
@purdy — The dollar is weakening. Don’t you read this blog? It’s broken down out of a bear flag, and USD looks like next stop is 71.
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Yes, I am aware that the dollar was weak. Sorry for not being clear about my question for this thread.
What I am trying to figure out is: Why were long rates are down last week (indicating market participants do not fear inflation) while at the same time the prices of stocks, gold, oil, etc, increased (indicating that the reflation trade continues)??
Long rate were down steadily and persistently even after the knee-jerk relief following the 7-year auction, while stocks held gains and gold strengthened. Seems to me the something was different – am I missing something?
Purdy — that’s the effect of quantitive easing. The Federal Reserve is expanding its balance sheet (again) in order to purchase the bonds Treasury is selling, therefore causing the note pricing to remain stable and even increase from “demand.”
We are taking from one pocket and putting into another — it’s an artificial process that can only continue with the complicity of our economic partners. I’m just not sure how long they’ll continue holding the short side of the stick — especially as their goods increase in price against a craptastic dollar.
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