Please Note – Unless it’s urgent, I won’t be posting until Thursday May 28th. I updated model portfolio.
U.S. Stock Market – Weakness in the final hour strongly suggests the tremendous bear market rally is petering out. Technically, you can’t rule out another try to the upside but unless breath and volume greatly expand, it would just set us up for an even bigger decline. Remember, I don’t believe we’re straight down this time around but rather a slow bleed for several months ahead.
While the “Don’t Worry, Be Happy” crowd has pulled out all stops in their quest to
manufacturer “green shoots”, what we’re likely to witness at best is a lessening of the descent in economic activity. The “happy” people would like you to believe we can go from crash to recovery without a recession. Maybe on CNBC that can play (after all, it’s the home of fantasies) out but in the real world we’ll need many months of flat growth before any sustained recovery can take place.
Foreign Stock Markets – As you know I sold off all exposure to equity markets worldwide. If you put a gun to my head (I hope this doesn’t give anybody thought), I would have exposure to China but even there the recent pop up economically seems to be flattening out.
Precious Metals – Gold and silver are breaking out. As frustrating as this sideways move has been, it has built a foundation that can get gold above $1,000 and stay there. That’s a key as the financial media (and even CNBC) will start chatting it up once it remains at four digits for awhile.
Base Metals – While we’ve seen the bottom, I don’t think base metals can run much higher due to my belief we’re not going to see the economic rebound many envisioned for the second half of 2009. This is no reason to sell but instead to overweight with precious metals versus base metals.
Oil – With my $60 target reached (very few $60 targets back in late December at $35 when I went long) and an overdue consolidation period anticipated, us long term oil bulls would be best serve by a $50 – $60 trading range for several weeks. Markets don’t often due what one wishes but here’s hoping this wish is granted.
Natural Gas – I mentioned I was starting to look at natural gas a few weeks ago when it was below $3.50 but I didn’t pull the trigger. It looked like I missed the bottom until the last few days. The fundamentals are horrible. There’s gas everywhere. The recent rally was really on the heels of oil and stock market rally versus any significant fundamental change. Natural gas equities got way ahead of themselves. I do think we can still get under $3 so I’ll gamble and remain on sidelines for now.
U.S. Dollar – The only concern now is what to wear to the wake and funeral. By the time Main Street and the “happy” crowd come to grips with the fact the world already knows we’re at the cusp of a debt implosion that will drive the dollar much lower and U.S. interest rates much higher, the U.S. Dollar Index should be at new lows below 70. A technical bounce is due but any significant rally back towards the former uptrend line is strictly selling opportunities.
10yr. and 30yr. Treasuries – My no-brainer short bet for 2009 looks better and better. Imagine where yields would be if the Fed wasn’t throwing a trillion dollars plus at bonds? The irony of this Fed act is its going to make things even worse in the long run. The Fed and the U.S. Government can’t keep buying everything (actually they’ve already gone past the point of no return). When the bond market concludes that, well… lets’ not ruin any bull’s weekend.
Geopolitical – It gives me no joy to have such a negative outlook on the geopolitical front. Unfortunately, I do believe geopolitics is going to become front and center for the financial markets in 2009. Some may disagree on the belief a new era has begun thanks to the Obama administration. Nothing could be further from the truth in my opinion.
While a national vote in Iran soon could have an impact on my assessment, I’m not optimistic that a significant political change is coming in Iran. If I’m right and the current regime remains in control, I believe it can harden them as impossible as that seems now. On the other side of the coin, Israel actually came away with recent meetings with the U.S. better than most thought was possible. By President Obama saying publicly he gives Iran to the end of the year to get seriously talking about stopping their nuclear bomb development, this gave Israel a line in the sand where they can say Iran can’t be stopped diplomatically and can attack Iran. Just a few weeks ago, it looked like any attack would find Israel with no support from even the U.S. This may have pushed Israel’s attack back a few months but I think they’re delighted to base on what has taken place.
Meanwhile, Hamas continues to grow and this is very troublesome not only for Israel, but the whole Middle East.
Afghanistan could become Obama’s Vietnam and Pakistan is an accident waiting to happen. If and when one of these geopolitical concerns moves front and center, the combination of this and weak economics should be too much for the “happy” crowd to overcome.
Please know that I sold some NDM. I’m buying a house in a couple of weeks. I still have over half my original position. It was one of the best weeks for NDM in well over a year. I think some of it was due for a rally in mining stocks in general. I’m hoping some of it was because a player or players interested in positioning themselves for a takeover. A man can dream.
Peter
Just curious why you would sell half of your NDM position when your expecting a buyout at a substantially higher price. I Know your buying a house but are you now not seeing a $15 to $16 buyout?
Greg – Peter has demonstrated enormous amount of prudence. He says he’s buying a house and one can speculate he’s paying cash since he has stated in the past he hates debt. The buyout could be months from now or never. The stock went up 30% in a week. He didn’t have to say a thing. Please show me where casey, rule, eden, raulston and the like tell you stuff like this.
BUY a house? My indicators predict the US government subsidizing housing 100%, plus a free car soon.
Or, has PLAN B already begun?
DL, congratulations!
In one sentence you have been able to poke fun at several US issues.
I keep reading the line and keep laughing.
Peter, Thank you for the update
Hey Everyone,
I was just checking out Peter’s closed out positions in his model portfolio. I found it very interesting that HOU, the 2x levereged ETF that tracks oil is his only loss. First of all that is amazing, second it is no coincidence it was this ETF. These things are vehicles for day traders, and not meant to be held. Sure you can make money on them holding them, but only if your lucky. It is best if you catch a major move. If you have a lot of volatility, the inner workings of the math to keep it 2x levered eat away at your investment. It is proven that if even over time oil goes up that your investment could still be at a loss. I am sure that most people that frequent this site already know this, but I still wanted to point it out to any new comers or anyone who didn’t already know. These things have their place and money can be made, as long as you know what they are intended for. Good luck out there.
Ryan
Just one more thing. Keep on rockin’ NDM. I am long and holding strong!
Ryan
Peter what is your take on the rise of U related stocks as of late? Do you see a leveling off, downside, or continued upside…. I for one am pretty clueless what they will do!
Peter,
You are buying a HOUSE? Here, in the U.S.A ? With your own personal money?
I am wondering if I should also do the same down here in Southern California.
The wife keeps getting madder and madder, while I try to convince her how the whole world economy went on a roller-coaster ride because of women’s nesting instincts.
Hey Peter,
Bob Hoye is putting some different views to you.
He sees the US$ maintaining it’s senior currency status due to lack of real alternatives and possibly the public forcing it back onto a gold standard.
He also says that gold will have a correction in the comming weeks along with the DJIA as base metal prices will go down and with that the gold bugs will get out of gold.
Do you agree of disagree? You have been more acurate than him in the last 6 months but gold has some mysterious forces on it and I wonder if you are still confident with $1000+ gold in the short term or if you are sitting on the fence a bit – you said it needs to get above $960 and it’s almost there. For you it seems gold’s ready to give a good rally and for Bob it’s a the top.
Thanks,
Jair
Hello Peter,
Thanks for the update
One train of thought as a possibility…….
The U.S. dollar is now dropping off at too fast a pace. Bernanke may be feeling the itch to chase investors back into treasuries for a while, to provide a little temporary support for bucky. If he were to do this, he would probably accomplish it the way he did in September 2008……yank liquidity out of the equity markets.
Maybe, maybe not.
Hi Jair,
About a week ago I saw a chart that Ross Clark ( he does the technicals for Bob Hoye) put out on gold that showed a rally to $960 than a resting phase or pull back until July August when gold would go through $1000 and beyond. On todays howestreet.com interview Bob indicated the market could start to sell off and possibly the large cap golds with it, however he likes the accumulation of the small caps over the next while. My understanding of Bobs thoughts are that hes bullish on gold and bearish on everything else.
I agree Peters work has been more accurate. Thank you Peter for keeping us so up to date.
So, Peter, this must mean that you’re calling a bottom on the housing market?
(I appreciate the honesty about reducing your NDM position, by the way.)
Harold:
If you want to know about the technicals on uranium stocks, check out Merv: This guy’s real good, and he updates this every day.
http://techuranium.blogspot.com/
Peter:
I also reduced my NAK position by half over the last 3 days. Just too much to leave on the table, But I refuse to buy a house – been there, done that, too much trouble. I rather enjoy being homeless.
Tuesday will almost certainly be down – the last hour of trading does correlate well with the following day. But I’m still in the shallow correction / one more leg up camp. If I’m wrong, can I live in your basement or at least pitch a tent in your back yard?
Peter:
I appreciate your transparency. Have a blessed time off.
Bye the way there is some Real Estate available in Supernatural Vancouver, B.C.
where the scenery is fantastic, the $ is growing stronger by the day and our hockey team is on the way up.
Hi peter, I am out of my gold position because i needed money for my sister’s marriage. But i m planning to get back into my position in next 1 month. DO you still expect any pull back toward $880 or $780 in next 2 months?? DO you track Indian share market? It has risen so fast after the elected congress party!! whats your view on Asian market and Indian market?? As always your advise are very much helpful. Thanks for 100% accuracy and good work peter.
Gold has formed a reverse head and shoulders chart pattern with the neckline at 1000. If Gold breaks 1000, the new target would be 1300. If there is a significant sell off on the major indexes the US. dollar could rally a bit as investors seek safe haven again and gold and oil might pull back temporarily, but the U.S. dollar is a dead duck and it’s only a matter of time until it continues it way down. Great forecast Peter, I couldn’t agree more.
Peter Grandich bullish on Real Estate? Haven’t you figured it out yet ? Mr. Grandich lives in one of the highest taxed States in The U.S. where the ‘State’ personal income tax is proposed to rise above 10% for higher incomes. The only reason that I live in my higher taxed ‘State’ is a chain to family ties. They got me. Personally, I’d like to leave the U.S., but I’m determined to stay and fight.
RUN FOREST …RUN !!
Gold has formed a reverse head and shoulders chart pattern with the neckline at 1000. If Gold breaks 1000, the new target would be 1300
(D.S.G.)
I’m bringing a different point of view. According to Tanashian that is not an inverted H&S on the gold weekly chart. He says it can’t be because “there is no prior weekly down trend for the H&S to reverse from and the H&S is nothing if not a reversal pattern”. I know many technician see it the way you do, a reversav H&S.
To # 13 Thanks for the tip on Uranium, been looking for some technical site to go to !
I’m buying a house in a 55 and over community mainly because i need to take care of my 88 year old mom. Almost no new homes or those less than 20 years old have a bedroom on the first floor for my mom. My condo is on the third floor. I’m paying cash as I’ve been debt free since 2000. I found debt to be a slave tool of the evil one (not Obama). My home closes in two weeks and my lungs was in NDM shares. One lung remains.
Harry,
“…the whole world economy went on a roller-coaster ride because of women’s nesting instincts.”
LOL, LOL, LOL I needed that laugh this morning!
Scott
Chris,
In a bottoming pattern Tanashian is right, but if you follow his reasoning gold would be in a double or triple topping pattern, top at 1000, and if the the price broke below 700 the new target would be 400. I don’t think there is a chance of that happening in the current environment. Chart patterns are just guidlines to put the probability factor on your side. My bet is gold at 1300 or higher before the end of this year.
Cheers!