Stats, Europe, & US Markets

By David Chapman – Re-Blogged From http://www.Gold-Eagle.com

More Questionable Numbers – The Latest US Jobs Report

The June nonfarm payrolls came in at a stunning up 287,000, following a revised downward May nonfarm payrolls of 11,000. The surprise number gave way to a ‘wow’ moment, and the stock market soon rallied to new all-time highs.

The Bureau of Labor Statistics (BLS) conducts two job surveys each month. Actually, one is carried out by the US Census Bureau (household survey), and the other by the BLS (establishment survey). The two reports don’t necessarily jibe, as differences abound. The household survey conducts interviews with individual households, while the establishment survey does the same, only with businesses. Two surveys, two separate results.

The nonfarm payrolls reported is from the establishment survey, but the household survey determines the unemployment rate and other statistics. The key to the most recent numbers is that many of the jobs were in leisure and hospitality, which tend to be low paying and part-time. The labour force participation rate rose, as more people came looking for work and that helped push up the unemployment rate.

Canada’s equivalent of nonfarm payrolls were not encouraging. Job loss was small, but full-time jobs were replaced with part-time jobs. Not a healthy sign.

The Economist and the Italian Job

Esteemed magazine The Economist has joined the ranks of the concerned over the deteriorating banking situation in Italy, where there are some US$400 billion of non-performing loans (20% of Italy’s GDP) on Italian banks’ books. The Economist points out many of the same problems we noted a week earlier, including the inability under current EU rules to provide a direct taxpayer bailout to the banks. Instead it has to be a bail-in.

Trouble is, much of the non-performing loans are held not by institutions as one would expect, but by individuals. Previous attempts at bail-ins have resulted in suicides and demonstrations. What the article does not get into is the potential for contagion, and the growing problem of EU banks in general, where many of the biggest banks are in trouble as their stock prices have plunged precipitously.

The EU is plagued with infighting, anemic growth, high debt, deflation and some $10 to $12 trillion of debt trading at negative interest rates. Bonds issued by the EU, Germany, Switzerland and the Netherlands trade at negative yields. And then there is Brexit, and maybe even an Auxit (Austria).

Brexit Revisited

A week can’t go by without talking about Brexit. The United Kingdom has a new prime minister in, Theresa May, and how she got there was worthy of the Kremlin. She has promised to be a tough negotiator on Brexit, but so has the EU. The UK powers want to take their time. The EU wants to hurry. The clash could be interesting, and the Brexit promises to be with us for some time.

US Election Season – Now the Real Fun Begins

The final run of the US election season kicks off next Monday July 18, with the Republican National Convention (RNC) in Cleveland. The Democratic National Convention (DNC) kicks off on July 25 in Philadelphia. Once the conventions are out of the way, three months of mudslinging will follow. The conventions themselves could be controversial, with heavily armed police and protestors preparing to clash.

Both current candidates for president are extremely low in approval polls, with the winner likely to be whoever is less despised than the other. Currently the Democratic candidate (Hillary Clinton) leads the Republican candidate (Donald Trump) by either a wide margin or a narrow margin. The final leg of the campaign to Election Day on November 8, 2016 promises to be volatile and potentially violent.

Weekly Market Review

Stocks

The US stock market (S&P500 and Dow Jones Industrials) has roared to new all-time highs. Ok not all of it, as the NASDAQ and especially the Dow Jones Transportations have not yet joined the party. A divergence? A non-confirmation? Time will tell.

The roaring jobs market and the realization that the Fed is probably one and done with regards to interest rate hikes have helped fuel the run to new all-time highs. But the rally to new highs has been very narrow, reminiscent of the famous ‘nifty-fifty’ rally of 1972-1973 that culminated in a 50% collapse in the markets into 1974. There have also been net withdrawals from equity funds, and some evidence that it is instead central banks buying.

The market rallied to new all-time highs, with only shallow corrections seen in the past couple of years (under 20%). We take a look at the various cycles impacting the US stock markets and muse about a possible 90-year cycle of major depressions, with the last one seen in the ‘dirty thirties’ with the 89% drop in the markets into 1932.

Currencies

The US Dollar Index continues to tread water following Brexit, with little movement this past week. The euro also had little movement, although the Japanese yen fell quickly from its high. We look once again at the Canadian dollar and its amazing tracking with WTI oil prices. The fact that the Canadian economy continues to be weak and the BoC has lowered its growth forecast has not helped.

Gold and Precious Metals

Gold had a corrective week, but so far it is shallow and all trends remain intact. Silver actually gained small on the week, and the gold stocks hit new 52-week highs once again before closing off small. Platinum and palladium joined the party, and both made new 52-week highs, joining gold, silver and the gold stocks.

Gold has been rising on negative interest rates, anemic growth, high debt and the central banks running out of ammunition to deal with the crisis. But the market has at short term become overextended, so a correction would be healthy. We examine two schools of thought about the current market:

One that believes that the current rally is a correction to the long breakdown from the highs of September 2011, and the other that believes that the correction down from September 2011 was itself a major correction to the bull market of 2001-2011. We are now embarking on a new bull phase to the upside.

Strangely, both scenarios are generally aligned — and both could see new all-time highs for gold and silver in the end. The recovery in gold stocks has been remarkable. Moreover, in a space of 9 months the TSX Gold Index (SPTTGD) has already recovered 50% of what it lost from September 2011 to its bottom in September 2015.

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The “Mystery” Of Who Is Pushing Stocks To All Time Highs Has Been Solved

By Tyler Durden – Re-Blogged From http://www.ZeroHedge.com

One conundrum stumping investors in recent months has been how, with investors pulling money out of equity funds (at last check for 17 consecutive weeks) at a pace that suggests a full-on flight to safety, as can be seen in the chart below which shows record fund outflows in the first half of the year – the fastest pace of withdrawals for any first half on record…

… are these same markets trading at all time highs?  We now have the answer.

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Market Strategy

By Justin Spittler – Re-Blogged From http://www.Gold-Eagle.com

Below, you’ll read our interview with Nick Giambruno, editor of Crisis Investing. In it, Nick breaks down his successful investing system—what he calls “the most powerful wealth building secret in investing.”


J. Spittler, editor of Casey Daily Dispatch: Nick, your advisory is called Crisis Investing. Could you explain what “crisis investing” is?

Nick Giambruno: Crisis investing is basically buying elite companies in beaten-up countries or industries. When there’s a crisis, most people only see danger. But it’s actually an opportunity. A crisis often allows you to buy a dollar’s worth of assets for a dime…or less.

Many of the world’s greatest investors have made their fortunes this way…but anyone can do it. You don’t need be rich or well-connected. You don’t even need to travel to do it.

In fact, if you have a regular brokerage account—and the courage to buy when others are fearful—you’re all set. The courage part is key. You can’t be a successful crisis investor if you’re not willing to go against the crowd.

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The Coming Market Rout

cropped-bob-shapiro.jpg   By Bob Shapiro

Several days ago, IM Vronsky wrote that the big banks are in deep trouble. Since the financial reporting of these companies leave out much of the data necessary to evaluate these companies, he pointed to the price history (and technicals) of several bank stocks.

While stock prices reflect only the collective market sentiment based on the incomplete reporting, it does indicate that all is not well in River City.

Looking at the overall market first, we find that prices peaked about a year ago and since have turned down. Lets look at some factors affecting stock prices.

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Germans And Japanese Play “Rollover!”

By Bill Holter – Re-Blogged From http://www.Gold-Eagle.com

After my last article we received two logical questions from readers.  The first one pertaining to “gaps” and the Deutsche Bank derivative exposure; the second pertaining to Japan’s strong currency with negative yields while the debt to GDP levels are astronomical.  Below is the first question.

“In the past you have warned about derivative exposure and now gapping.

One of my worst fears as a day trader on a derivatives platform is gapping. That is why I will never have an open position when the market is closed. Even then, that is not guaranteed.

A lot of trading platforms got hammered when the Swiss franc was revalued.

Could you put out a letter for your readers explaining why for example the Deutsche Bank derivatives exposure is so dangerous in terms of gapping.”

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Common Stocks Crash Through The Ice

By Dr Richard S Appel – Re-Blogged From http://www.Gold-Eagle.com

United States equities have long been skating on thin ice. It appears they have finally collapsed through it, and are now treading water before sinking deeper. From an historical standpoint they have arguably been overpriced for most if not all of the past twenty years. Their dividend yields, price-earnings ratios, price to book values and other meaningful measures have long ago gone beyond all safe valuation parameters. For over hundred years, similar conditions have always signaled caution, if not danger. Why is it now that stocks appear to be finally breaking down, and sounding the alarm of an impending Bear Market?

There are two major guides that have endured the test of time. For at least a few generations they indicated the limits that people were willing to pay for ownership of common stocks. First, whenever the Dow Jones Industrial Average’s price-earnings ratio approached or exceeded 20:1, equities normally experienced sharp Bear Market declines. Similarly, periods when its dividend yield plunged to 3% or less usually spelled impending disaster for the fate of stock prices. A bit of history might be useful at this juncture.

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Fed Starts To Walk Back Its Rate Hike. Next Step: More QE And Bigger Experiments

By John Rubino – Re-Blogged From http://www.Gold-Eagle.com

That didn’t take long. A month after the Fed’s dreaded quarter-point interest rate hike, the markets tank and then come the talking heads to promise that whatever is bothering traders, Daddy will make it right.

Falling inflation expectations could mean policy rethink: Fed’s Bullard

(Reuters) – The continued rout on global oil markets has caused a “worrisome” drop in U.S. inflation expectations that may make further rate hikes hard to justify, St. Louis Federal Reserve President James Bullard said on Thursday.

Since the dramatic fall in oil began in 2014 Fed officials have insisted the impact on U.S. price levels would be temporary, bottoming out at some point and allowing inflation to rise to the Fed’s 2 percent target.

Bullard said he has so far been willing to look beyond a slip in expectations as likely passing. But he is now worried the plunge in oil has unmoored inflation expectations as well, a fact that would make it more difficult for the Fed to lift inflation to its 2 percent target and could force officials to rethink the four quarter-point rate hikes expected this year.

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