Peter Grandich today on BNN’s “The Close” recorded October 20th at 4:15 pm.
Tags: BNN, Grandich, melt-up, mini-melt-up, US+Dollar, US+economy
Agoracom Blog
Grandich on BNN
Posted by
at 5:34 PM on Tuesday, October 20th, 2009
On The Track Of The Bear
Bear Stories While Sitting Around a Campfire
So we’re sitting around a night time campfire and the quarry is Grizzley Bear in the Canadian outback. A big Bear is out there someplace and every time the breeze blows the bushes a little bit, the hunters raise their rifles.
The hunters have the scars from Bears of seasons passed and take no chances letting down their guard. From time to time, they hear him roaring out there in the distant night. It sounds like a big hungry Poppa Bear.
He could rush the camp unexpectedly and quickly inflict injuries or worse. But there’s no sign of him right now and the bright campfire should hold him at bay for a safe night, but no one sleeps well.
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So at the bottom is the link to a real ‘Bear Story’. We are in the area that parallels the greatest decline in modern U.S. stock market history. True, no two markets are the same. The times and perhaps economic circumstances are different, but the possibility of a prolonged deep decline is quite real IMHO.
It may be of interest to mention the disturbingly high Sentiment Figures reported by some surveys. Barron’s Magazine recently reported that the Consensus, Inc. survey was 70 – 75% Bullish. Some of the others are not as high but certainly not constructive. My suspicion is that this rise from March 2009 will turn out to be ‘The Right Shoulder’ of a massive top formation. Thoughts that Money managers will be pressured to meet market performance and dress portfolios may be correct at least to the end of the year.
But how much credibility can we place upon charts, different indices, indicators, divergences, sentiment readings? They’re useful for timing, but there is no assurance that will be interpreted properly.
Perhaps most disturbing is mention within the article that the Price Earnings Ratio for Common Stocks is above 100. That implies (Not Related To Dividend Yield) that the investment rate of return for earnings is less than 1% per annum. No further comment about the overvaluation.
Now some folks may say that the high price Earnings Ratio reflects depressed earnings potential which will rise with the economy improving, shrinking the Price Earnings Ratio. Sometimes these high P/E ratios are representative of temporarily weak market conditions, narrowing when conditions allow earnings to improve.
When considering the overall economic fundamentals of the U.S. economy, it seems that a struggling environment will stretch indefinitely, and that may be a best case scenario. Sure some sectors will do well, but by and large, today is an unfavorable operating environment for most U.S. corporations. Corporations can only cut expenses so much before impairing ability to deliver a product or service. We may be there. Sales volume and gross profit margins will decline in a further weakening when ‘The Back End Of The Storm’ arrives. It will go right to the bottom line causing losses for many corporations. We may see that next year, and the market will foresee it at some point.
Perhaps what we have seen for the past several months or so is a rebound from the panic depths extending from October ‘08 to March ‘09.
To me, it appears that there is an absence of impetus within the economy for a sustained rebound. Perhaps conditions will remain stable through the fourth quarter of 2009, comparing favorably to the panic depths of a year ago. Then we will be looking at virtually every U.S. Common Stock at a new 52 week high.
So what should the P/E ratio be if conditions remain weak indefinitely? TEN (10) which would imply a stock market price of perhaps 1,000 or less measured by the D.J.I.A. That’s essentially Zero in my opinion, and we’ll have to see what happens.
Here’s the Bear Story as promised. This’ll really scare the campers…
http://finance.yahoo.com/news/1929-And-Today-Sobering-etfguide-2101131945.ht
ml?x=0
Michael Berry says he owns GG (Goldcorp):
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Quote
We forecast the following most likely scenario:
1) The dollar will test its March 2007 low point of .7132 (see graph above).
2) Gold will appreciate over the next two years toward the $1500 mark, silver
toward $35.
http://www.DiscoveryInvesting.com/Notes
Nothing I could disagree with in that interview. Interesting reaction by Mike from BNN finding Peter’s dire prediction as remarkable … seems to me as if the many analysts have forgotten that TA does not rule over fundamentals.
the prophet
http://www.newswire.ca/en/releases/archive/October2009/20/c8611.html
Trivia with jon.
NSU up 14.5% today…nice
NAKTOTENBUCKS- long time no hear….NAK is holding up, still waiting for that pull back…what say you? Also, I did get in on NSU a few times before, but gave up…this time, learned my lesson and got in at 2.70 and holding on for the ride, as with KMK too!!
oh, and why the move on NSU today….because of target being raised??
Nevsun Tgt Raised To C$3.50 From C$2.65 By Haywood >NSU.T
Canada Hot Stocks: Barrick, Nevsun
Tuesday 10/20/2009 2:00 PM ET – T
Among the companies whose shares are making notable moves in Tuesday’s session are Barrick Gold Corp. (ABX) and Nevsun Resources Ltd. (NSU.T).
Barrick ($38.09, -$0.89, -2.3%) will cut about 80 jobs, resulting in a charge of about $30 million to be split between the third and fourth quarters.
NSU finished at 3.20 though. so down a ways from the 14.5% high for the day. so i guess we will see what tomorrow brings.
any one know why EVG popped up to 1.14 and then retracted back 1.06? im not a geologist but i thought those drill results were pretty good. apparently not as good as hoped?
and finally SGC had a nice jump today of 10%. maybe speculation on eds birdy for their upcoming drill results?
Everyone keeps talking about NAK in here, but is anyone aware that NSU is up 330% ytd? This stock is doing even better than GSS (which is up ytd over 250%)
Kudos to Peter. NSU was a great pick
Jim – Like I said before…I don’t think we will ever see sub-$6.00 NAK again. I will only consider rolling in at $6.85 or below.
By the way, tomorrow is the day my NAK holdings go long term! That’s an extra 40% or so that stays in my pocket…gotta love it.
OK NAK, you are now free to begin your climb into double digit territory. I expect to change my name to NAKTOFIFTEENBUCKS before the end of 2009 once NAK gets above $10.00.
Thanks SGGroup. Found both Bear Stories very informative.
NAKTOTENBUCKS- what is the 40%, a Canadian tax on short term (<1 yr holdings)?
By the way, LMA has been often compared to NSU in many ways… it’s more under the radar far as coverage (hope that changes one day), but has performed very well lately. A past top pick (2006?) of Peter’s. Not sure what he would say about it now. But it did take off this yr.
It’s reporting on its VMS deposit at Hassai, which the market had largely ignored until recently. The 2nd of 6 pits is due soon as well as other reports…
SGG great read … a must read for all who want to hang on … further lends credence to the upper limit that PG predicts …. TAKE HEED all!
http://finance.yahoo.com/news/1929-And-Today-Sobering-etfguide-2101131945.html?x=0&.v=1&.pf=personal-finance&mod=pf-personal-finance
the prophet (not of doom of hope)
AAUK – I don’t know whether there is any direct correlation here with NAK but did find it interesting about the massive layoffs happening. See headlines and link below (remember they have large NAK/NDM investments)
“LONDON (MarketWatch) — Mining company Anglo American said Thursday that it will cut around 2,700 white-collar jobs as part of a plan to streamline its operations and sell non-core assets.
The cuts represent roughly a quarter of the group’s “overhead staff” — management and administrative positions at its corporate offices worldwide — and are expected to result in annual savings of $120 million. ”
http://www.marketwatch.com/story/anglo-american-to-cut-2700-jobs-sell-assets-2009-10-22
THURSDAY MORNING UPDATE: Mark Leibovit has his Timer Digest on Sell which means he is shorting via ETFs and states we should either be in cash or short. He talks about how interesting the market move was yesterday as he believes two things occurred which directly affected it. First, late in the morning the anonymous report that the gov was going to cut pay in 6 bailed out companies by 90%. Second, was the disappointing Wells Fargo 3rd quarter report with bank analyst Richard Bove cutting rating to sell. That good news impacted all the financials. As Mark says, “Basically, these two stories pulled the rug from out under the market. And, folks more is yet to come! “As for PM, while they were up given that demise of the dollar, Mark feels gold is underperforming. Should be soaring. “…something rotten in Denmark?” He also expects a higher bond market as folks flee stocks.
Let’s keep the good discussion started yesterday going. I am on my way traveling to the hinterlands of Tennessee to get away but I will be checking periodically to see what you my blogger friends have to say….I am listening!
Fidelity allows for international buying – I’m traveling today in the hinterlands as indicated above so my reception is not the best but I will be following up on the following story which may herald good news for us in the US as we may beable to buy Canadian stocks direcly instead of on the pink sheets. You may also want to check it out.
Fidelity Offers Online Stock Trading for International Shares
Share | Email | Print | A A A
By Josh Fineman
Oct. 22 (Bloomberg) — Fidelity Investments, the world’s largest mutual fund manager, is offering online trading for international stocks as it advises investors to keep as much as 30 percent of their equity holdings outside the U.S.
Buy Short ETF’s?
The leveraged 2:1 & 3:1 products are literally like buying ‘Put Options On Stock Market Momentum’. These products are behaving better than they had been, but it could be a timing mistake to employ a ‘Shorting Strategy’ just because the market is overbought and overvalued.
From what I can see, we do not have obvious divergences between sectors which usually heralds a decline. In recent days, we have had a pickup in volume on down days but that may only suggest a temporary correction.
Generally, the tape has been pretty good on ‘Up’ days.
Before I would consider buying leveraged short ETF’s, we would want to see a rally following a correction where the Large Cap issues outperform select sectors such as Small Cap Issues, transports and perhaps other market segements along with a general deterioration of momentum. So maybe there’s a pullback coming in the stock market and then another advance where divergences of sectors and indicators would become apparent. Right now, there doesn’t appear to be ‘Evidence’ that we are ready to embark upon a significant decline.
Then, there’s also a possibility of a fairly extended period of sideways movement for a couple of months or more with the stock market going no place amidst enthusiasm and deterioration (A topping process). That would allow the continuing advance to expends itself against profit taking. Generally, when market sentiment is elevated to quite Bullish levels, there’s little or no progress.
Gold? Yes, it looks a bit sloppy, but the ‘Neckline’ is at 1027, and it will be interesting to see what happens at that level. So what about 1,000 on Gold? Is a 5% pullback something to worry about? We may not be able to go beneath 1,000 which could be significant support now.
Pay attention to P.G.’s comments, most likely than others to be accurate.
Jim – The 40% is the difference between paying 15% long term cap gain tax and 35%-40% ordinary income tax on short term gain. For example, $100K short term profit realized last week = $35K in taxes; $100K long term profit realized today = $15K in taxes. That’s $20K ($85K net profit vs. $65K net profit…nearly 40% extra) that stays in my pocket since my gains are now long term.
New Zealand Dollar and other currency info – the excerpt below from the Everbank guy makes me think that a New Zealand currency trade might be in order. The ETF in the US is BNZ
“So… I think the BOC did what they set out to do, and that was to: 1. stop the talk about a rate hike before their stated timeline, and 2. stem the loonie’s rise… The loonie dropped about 2% on the day…
But, like most things… The pain of the BOC statement will be forgotten about in a few weeks, and I suspect the loonie to be back on the road to parity against the dollar…
And then there was this… Long time readers know my dislike of the Reserve Bank of New Zealand’s (RBNZ) Gov. Bollard, due to his penchant for dissing the currency, kiwi… Well, in a turn of direction… Gov. Bollard said in a speech last night that “there is little the Bank can do to bring down the value of NZD, and that the high value of NZD is not necessarily an impediment to raising the official cash rate in order to quell rising house prices.”
That’s Central Bank parlance for: “I’m giving you the green light to push kiwi higher”…”
any one know of any good shorting ETFs on the TSX, preferably leveraged?
also is any one else getting a bit apprehensive that this market fall might happen with out a melt up? to me it almost looks like the dow hitting 10000 is enough for investors to realize how far this has come and it seams like after the results from Wells Fargo yesterday there isnt a lot of market sentiment. i dunno i was looking forward to a melt up but now im not so sure…i hope PG is.
RyanM
try http://www.hbpetfs.com/leveraged.asp
thanks john that is a beauty!
Ryan– Here is a list of ETFs
http://etf.stock-encyclopedia.com/category/etfs-listed-in-canada.html
Jinchuan Group Vice President Zhang San Lin, expressed opposition to mainland China Mining (KMK.V: Quote) (KMKCF.OB: Quote) did not seek shareholder consent to Zijin Mining (601899.SS: Quote) (2899.HK: Quote) additional shares. Jinchuan is China’s largest shareholder mining.
from google news for kmkcf(rough translation)
could someone tell me how to delete the debt clock from running on my computor?i cant spare the extra memory it takes.thanx
By the way if you want an avatar beside ur name in comments go to Gravatar… it associates an avatar to ur email, and seems to work here.(Yes!, it’s embarrassing being the only one)
Susan,
I looked for more information from Fidelity and am waiting a reply from them on the article “Fidelity Offers Online Stock Trading for International Shares”
Johnny,
I don’t know if this will work for you, but the clock goes away when I click on the headline (e.g., Grandich on BNN). In this view, instead of the clock, it shows the previous & next headlines. I’m using Firefox as my browser, – I’m not sure how other browsers handle this.
Tom, thanks…..i wait to hear what you found out. The government may have its own “working group” as Peter put it in his previous blog….but we do too!
Ritchard – that is interesting on KMK…..I wonder if that is what Peter meant when he gave his update on the just previous blog when he talked about the dissatisfaction of the former sole shareholder in KMK. That fact didn’t seem seem to bother Peter much.
Tom – Check out this URL. It has all the info you need to learn about Int’ trading at Fidelity. I got it today and am impressed. You can hold both domestic and international positions in the same account and the real-time quotes/charting/news on International securities is invaluable.
http://www.fidelity.com/internationaltrading
Sean,
Thanks, that did the trick! (and a lot faster than their email response!!!)
There is a $50 additional fee per trade of foreign stocks! Yikes!
Interactive brokers is much cheaper. It takes a while to get used to their complicated platform, but it is the best option out there.
Susan, Sean,
Here is the reply from Fidelity (I tried to highlight the pertinent info…) Looks like I need to increase my # of trades. Oh well…
Thank you for taking the time to contact Fidelity and allowing me the opportunity to assist you today.
We currently do offer trading for international securities. For now, Fidelity’s new service will be available only to those who make more than 120 trades a year and have at least $25,000 at the firm, or those who have at least $1 million at the firm.
Foreign stocks can be traded at Fidelity if the stock trades on one of the U.S. exchanges or the Over-the-Counter market. In order to trade foreign securities through Fidelity, the securities must be American Depositary Receipts (ADRs) or trade through over the counter (OTC) market makers. Fidelity customers are currently unable to trade foreign securities directly on foreign stock exchanges. Also, in addition to the regular commission for trading some foreign securities have an additional fee up to $50.
Foreign securities on the OTC market may be purchased from National Financial Services LLC, Fidelity’s clearing subsidiary. Securities are purchased in U.S. dollars after the market maker has made the currency conversion. Fees are assessed on the shipping or transfer of such foreign securities if you want the physical certificate.
To determine if a foreign stock trades in the U.S., you may want to perform a search for the security using our Symbol Lookup tool. You can access this tool by following these steps:
1. At the top of the page, click on the green box called “Research.”
2. Choose “Quotes.”
3. Click “Symbol Lookup” next to the ticker symbol box.
4. Enter name of security (Please try the first name of the company before attempting the entire name)
5. Click on “Search.”
You may visit our International Trading section of the website with the link I have provided below.
http://www.fidelity.com/internationaltrading
We appreciate your message and your interest in trading foreign securities with Fidelity. If you have further questions regarding trading foreign securities, please contact a Fidelity International Trading Specialist at 800-544-2976, Monday through Friday, 8:00 a.m. to 4:30 p.m. Eastern time.
If you have any other questions or comments, please send us another email at any time. We appreciate your business. Have a great evening,
Sincerely,