Watch Out For The Bull Trap In Gold

bull trap in gold

Does the recent rally in gold give bulls the “All Clear” that it’s finally safe to come out?

HELL NOOOO… IT’S A TRAP! Read more

Why Banks Are Being Taken To The Woodshed

U.S. financials have been taken to the woodshed over the last month.

Many bank stocks are either in a bear market, or very close to one. They look disastrous from a technical standpoint. As you can see in the charts below, various banks have formed long-term topping (bearish) patterns that indicate a likelihood of further downside.  Read more

China’s Deflationary Renminbi Devaluation

The 4 Horsemen Of The Global Deleveraging Apocalypse Part I : China’s Renminbi Devaluation

This is part 1 of our 4-part series on the global deleveraging which is now beginning and is expected to last over the next 2 to 4 years. We anticipate a lot of pain for the global economy in the form of crashing security markets and depression-like economic conditions. This series will cover how we believe this crisis is likely to play out. We will not only help you understand what’s going on, but we will show you how to protect yourself from the coming economic turmoil. We’ll even show you how you can profit from it. Enjoy part 1 below: China’s Renminbi Devaluation.

 

“Declaring war on China’s currency? Ha ha.” That’s the interesting title of a recent article published by the People’s Daily (official newspaper of China’s Communist Party). It serves as a warning to legendary fund manager, George Soros, against shorting the Chinese renminbi. (Side note: China’s currency has two names, the Yuan and Renminbi, they are interchangeable.) Read more

MLPs: A Great Opportunity In The Near Future, Just Not Yet

MLPs: A Great Opportunity In The Near Future, Just Not Yet

  • Shares of various MLPs have been battered over the last year.
  • It’s a classic case of the baby being thrown out with the bathwater. Attractive MLPs with strong balance sheets have been sold indiscriminately along with over-leveraged operators.
  • Soon investors with dry powder will be able to pick up excellent MLP assets for pennies on the dollar.

Crude continues its relentless march downward, blowing through predicted bottoms and calls for reversals. Its fall has surprised many and devastated a few. For us, this has been completely expected. We’ve been calling for $20 oil since 2014. We know this downward trend won’t be over until there’s blood in the energy streets… total capitulation… which is why we have our target for oil at $16/bbl.

All is not doom and gloom though. For the investor who is patient, there will be some amazing opportunities available in the oil and gas space in the coming months. Read more

Expectations Blockage – Short Spectranetics Corp (SPNC)

It’s important to understand how to evaluate a company. But it’s even more important to know how to evaluate other investors.

It all comes down to expectations. What is the majority expecting? How can they be surprised? These factors are what move a stock’s price.

And nowhere is this phenomenon more prevalent than in growth stocks. 

Take The Spectranetics Corporation (SPNC) for example. From 2012 to 2015, this cardiovascular medical device maker rocketed 345%.  

How’d this happen? Did it have consistently strong earnings? Read more

The Fed Already Tightened 3.25% And Probably Doesn't Know It

The Fed Already Tightened 3.25% And Probably Doesn’t Know It

  • As seen in the Shadow Federal Funds Rate, the effective interest rate was as low as -3% in April of 2014 before the Fed started tightening.
  • The current rate of 0.25% means the Fed has already tightened by 3.25%.
  • There is no way the Fed will stick to its proposed rate hike schedule. If it does, we should expect crippling deflation, a market crash, and a resulting depression.

“Don’t Fight The Fed” is a Wall St. adage as old as the Central Bank itself. The reason for its staying power is that it’s absolutely true. Interest rates set by the Fed are one of the single most important factors affecting stocks and the wider economy.

The Fed Funds Rate affects the interest you pay on a car loan, the demand for housing, the hurdle rate for a company to make capital expenditures, the discount rate used to value companies and their stock, and much more. Read more

Long Bonds: A Safe Haven In Volatile Markets

Long Bonds: A Safe Haven In Volatile Markets

  • Long dated US treasuries do well in times of market volatility and provide their best returns during bear markets.
  • US debt is viewed as a safe haven when markets are in turmoil and investors flood into them.
  • Recessions are deflationary and inflation expectations plummet. This increases the expected real return on bonds.
  • Lower growth and lower inflation lead to a lower federal funds rate. This rate is transmitted throughout the yield curve and results in lower yields across multiple durations.
  • A potential ease in selling pressure from China will also help propel bonds higher.

Read more

Short UPS: What Brown Can't Do For You

Short UPS: What Brown Can’t Do For You

  • Amazon’s potential delivery service is not a significant threat to UPS.
  • The real problem they face is a slowdown in the economy.
  • The faltering economy along with lower oil prices and a stronger dollar are tanking UPS’ stock price.

When it comes to the United Parcel Service (NYSE:UPS), investors love talking about the threat of Amazon (NASDAQ:AMZN). There’s constant chatter that Amazon is creating a delivery network to crush UPS. And that’s why you should sell.

Yes, it’s true. You should sell UPS. But not because of Amazon. Amazon may be a long-term threat, but investors are blowing it out of proportion. The real reason you should sell is because of massive macroeconomic headwinds. These macro drivers trump any problems Amazon may cause.

UPS is in the business of making deliveries. They’re the busiest and most profitable when the economy is booming. But that’s not what’s currently happening in the US. Our economy is slowing.

The faltering economy along with lower oil prices and a stronger dollar are killing UPS.

But before we get into that, let’s first clear up the confusion about Amazon. Read more

ConocoPhillips: The Dividend Isn't Worth The Potential Squeeze

ConocoPhillips: The Dividend Isn’t Worth The Potential Squeeze

  • A bet on ConocoPhillips is a leveraged bet on oil.
  • Why there’s a good chance the dividend will be cut.
  • There are safer plays for a dividend investor looking to put money into an E&P.

I’ve heard many income investors pitching ConocoPhillips (NYSE:COP) as a great value at its current price and 6.4% dividend (one of the higher yields among large E&Ps). Their analysis relies on two assumptions. First, current oil prices are unsustainable and will soon rebound. Second, ConocoPhillips’ dividend is sacred to management and is therefore safe from being cut.

I believe these investors have fallen prey to a bit of recency bias and a lot of wishful thinking. Dig into the assumptions and you find that buying ConocoPhillips as a value income play is far from a sure thing – and in fact comes with quite a bit of downside risk.

A bet on ConocoPhillips is a bet on the future price of oil. Read more

Stop Listening To Blowhard Oil Bulls

Stop Listening To Blowhard Oil Bulls

Some investors truly deserve a gold medal. The mental gymnastics they execute to avoid evidence contrary to their beliefs is amazing.

Instead of objectively assessing the avalanche of data that runs against their long-held opinions; they spin, distort, and bend over backwards to twist reality into what they want to be true.

Why? Because nothing is more important to these people than proving themselves right… even if that ultimately means staying wrong.

This human foible is perhaps no more prevalent than in the financial commentary space. And currently, the greatest examples of this are the indefatigable commentariat of oil bulls. Read more