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Might Silver’s Current Chart Similarity with 2008 Be Implying What’s About to Happen to Rest of Market?

Editor — Tue, 18 Oct 2011 07:57:46 +0000

A look at the chart for SLV from September 2007 to August 2008 (11 months) and from November 2010 to October 2011 (11 months) is remarkably similar – almost identical in fact. Therefore, if silver continues to trace out a similar path to what transpired in 2008, what are the possible implications for stocks, bonds, currencies, commodities, and precious metals? Take a look at the following 19 charts for some possible outcomes. Words: 731

So says Chris Ciovacco (www.ciovaccocapital.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Ciovacco goes on to say:

You don’t need to know anything about technical analysis to conclude the two charts below of the silver ETF (SLV) look similar in many ways. The first chart is from August 2008 and the second from 2011 (compare points A through H).

How can these charts help us with stocks, commodities, and precious metals? Silver tends to be in greater demand when (a) the economy is expected to grow, and (b) when inflation expectations are high…When silver is weak it is logical to question (a) the expectations for future economic growth, and (b) if investors are concerned about future inflation. If inflation is not a concern, then deflation fears are most likely increasing.

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The charts below show asset class performance from August 29, 2008 through November 21, 2008, allowing us to answer the question, “What happened next in the 2008 deflationary period?”

The key for the charts below: (SPY) S&P 500, (EEM) emerging markets, (FXA) Australian dollar, (UUP) U.S. Dollar Index, (DIA) Dow, (DVY) dividend stocks, (TLT) Treasuries, (SH) short S&P 500, (GDX) gold stocks, (GLD) gold, (SLV) silver, (DBC) commodities, (DBA) agriculture, (EWG) Germany, (PFF) preferred stocks, (XLU) utilities, (XLP) consumer staples, (XLY) consumer descretionary, and (JJC) copper. Symbols and descriptions are shown in the upper-left corner of each chart below.

What happened next in 2008?

If the silver ETF can fill the gap…between 32.54 and 34.51, it increases the odds of bullish outcomes for stocks and commodities. The longer SLV can hold above 32.54 the better for the bulls. If SLV fails to clear 32.54, the odds increase of an August 2008 scenario occurring again, similar to the outcomes shown in the charts above. An intraday move in SLV below 27.41, and more importantly, a weekly close below 27.41, increases the odds the deflationary trio of shorts (SH), the dollar (UUP), and bonds (TLT) will perform well.

Conclusion

As of this writing, we continue to give the bearish/deflationary case the benefit of the doubt, understanding strong and gut-wrenching countertrend rallies are part of any bear market. Our portfolios continue to contain a mix of cash, shorts (SH), bonds (TLT), and the dollar (UUP). The deflationary/bearish case will take a hit if the S&P 500 trades between 1,250 and 1,260 for more than three or four days.

*http://www.safehaven.com/article/22924/silvers-signals-lean-bearish-for-stocks-and-commodities

These 17 ETFs Have Higher Yields Than 10 Year Treasuries!

Editor — Mon, 29 Aug 2011 07:16:36 +0000

We are in a “new normal” environment with a future of low returns and high volatility. The Fed is pledging to keep short-term interest rates near zero through mid-2013. [Nevertheless,] in this low-yield world, there are still plenty of large ETFs offering yields higher than the 10Year Treasuries. [Let me explain in detail below.] Words: 723

So says Hao Jin in an article* posted on SeekingAlpha.com which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Jin goes on to say in the article:

Large ETFs with Yields Higher Than 10-Year-Treasury

There are 1,256 ETFs in Yahoo Finance’s ETF Center. Of the biggest 50, the following 17 ETFs have higher yields than the 10-year Treasury:

Fund	Net Assets	Yield	Expense Ratio
SPDR Barclays Capital High Yield Bond (JNK)	7.33B	10.2%	0.40%
iShares iBoxx $ High Yield Corporate Bd (HYG)	8.90B	8.2%	0.50%
iShares S&P U.S. Preferred Stock Index (PFF)	8.10B	7.3%	0.48%
iShares MSCI Brazil Index (EWZ)	12.16B	5.6%	0.61%
Vanguard MSCI European ETF (VGK)	8.13B	5.2%	0.14%
iShares iBoxx $ Invest Grade Corp Bond (LQD)	14.23B	4.6%	0.15%
iShares Barclays TIPS Bond (TIP)	21.95B	4.2%	0.20%
Vanguard Intermediate-Term Bond ETF (BIV)	12.32B	3.7%	0.11%
Vanguard REIT Index ETF (VNQ)	20.99B	3.6%	0.12%
iShares Barclays Aggregate Bond (AGG)	12.25B	3.3%	0.20%
iShares MSCI EAFE Index (EFA)	39.24B	2.9%	0.35%
Vanguard MSCI EAFE ETF (VEA)	8.96B	2.7%	0.12%
Vanguard Value ETF (VTV)	15.12B	2.7%	0.12%
SPDR Dow Jones Industrial Average (DIA)	9.99B	2.5%	0.18%
Vanguard FTSE All-World ex-US ETF (VEU)	14.06B	2.4%	0.22%
iShares Russell 1000 Value Index (IWD)	11.22B	2.3%	0.20%
iShares FTSE China 25 Index Fund (FXI)	6.77B	2.3%	0.72%

(The above data is from CNBC, Forbes and Yahoo Finance, and is valid as of August 28, 2011)

Conclusion

The weakness of advanced economies means markets will remain subject to policy intervention for an indefinite period, distorting asset prices to such an extent that valuations will defy logic and thus heighten volatility. Yields on emerging markets’ debt are far higher than most Western bonds, despite the fact that it is actually EM countries that have the most robust balance sheets and therefore are arguably far less vulnerable to default risk…

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The same applies to equity markets. With US Congress focused on shrinking the deficit through budget cuts, it is unlikely that the U.S. government could stimulate the economy with new spending. Emerging markets such as Brazil and China have higher growth rates and lower unemployment than the US.

Investors could diversify their portfolios by investing in a broad range of emerging-market ETFs with high yields.

* http://seekingalpha.com/article/290439-17-large-etfs-yielding-better-than-the-10-year-treasury?source=email_portfolio

Related Articles:

1. Don’t Fight the Fed: Buy Some of These 20 Blue Chip Stocks Instead!

The herd continues to stampede into U.S. Treasury debt of every possible maturity to, theoretically, avoid risk. Yields on AA+ 10-yr bonds can be locked in to yield 2.11% per year and you get your principal back in 10 years. [As we see it, though] the only justification for [such a meagre] return on invested capital must be tied to the belief that a return is better than nothing given the prospects of a future depression. We believe, however, that fighting the Fed and investing like a depression is coming is not the right way to position your portfolio. [Below are 20 suggestions on how to generate in excess of 2.11% returns plus strong appreciation potential with modest risk.] Words: 657

2. Now’s the Time to Buy Quality Dividend Stocks – Consider These 11

The decrease in stock prices over the past weeks has many investors scared that the market is forecasting a dip in the economy. This panic has started to create an environment where enterprising dividend investors could start adding to their positions at cheaper prices. In fact, if stocks keep going lower this would create tremendous opportunities for enterprising dividend investors to scoop up some of the best dividend stocks in the world at fire sale prices. In this article I will explain why the market dip has created a perfect opportunity for dividend investors and specify 11 stocks worth considering. Words: 819

Editor’s Note:

The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.

Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

Massive Stock Market Selloff Likely in Mid-2011! Here’s Why

Editor — Mon, 06 Dec 2010 07:18:11 +0000

How to Protect Yourself From the Crisis of 2011

A major crisis is coming in the first half of 2011 and it could cause a worldwide financial disaster, global market crashes and the destruction of wealth that will make the popping of the dot-com and housing bubbles feel like a mild inconvenience! Why? Because, quite simply, America is playing a dangerous game of “chicken” with its national debt – and the ramifications are extraordinary. Words: 1475

So concludes Marc Lichtenfeld in his article* which Lorimer Wilson, editor of www.munKNEE.com, has reformatted into edited [...] excerpts below for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.) Lichtenfeld goes on to say:

I’m going to explain the situation and give you three ways to protect yourself from this impending crisis before it’s too late…

A Debt Crisis is Coming to America as Early as May 2011

America’s debt ceiling currently stands at $14.3 trillion - the level that, by law, the government’s debt is not allowed to exceed – but the trouble is, the government’s present debt has swelled to $13.7 trillion [already] and this means that at the current rate, we’re on course to smash through that $14.3 trillion ceiling around May 2011 (although it might happen a month or two later, depending on what budget cuts are enacted in the next few months and how quickly they’re implemented) unless something is done quickly to avert what would develop into a major crisis of confidence in the U.S..

The Domino Effect of the Crisis Would Be Brutal

What will the government do about this impending crisis? Same thing it’s done almost every year since 1962 – raise the debt ceiling so America can pay its bills. Congress really has no choice in the matter either. If the ceiling isn’t raised, we’ve got a problem – a crisis – and a very big one. Without Congressional approval for additional debt, the U.S government cannot pay its bills – most notably, interest payments on treasury bonds, bills and notes.

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If America defaults on those payments, or even misses them by just one day, the domino effect of such a crisis would be brutal…

Domino #1: The country would lose its AAA credit rating and those bonds, bills and notes would no longer enjoy their status as the safest investments on the planet.
Domino #2: In turn, a lower credit rating would mean that the United States would pay higher interest on its bonds in order to attract investors. Result?
Domino #3: A tidal wave of selling through fixed income markets, driving interest rates higher still.
Domino #4: Social Security would be hit hard, as its funds are invested in Treasuries. Suddenly, Social Security would have far less resources than just a day or two earlier.
Domino #5: If money is pouring out of so-called “safe” investments, you can bet that in that kind of environment, the demand for riskier investments would be next to nil. Stocks and financial markets around the globe would plummet.

The Circumstances Surrounding Whether or Not to Raise the Debt Limit Are Very Different This Time Round – and the Consequences of Not Doing So Would be a Crisis of Major Proportions!

This year’s Congressional raising of the debt limit is different than [any previously] … because, this year, some members of Congress have said they won’t vote to raise the debt ceiling – and they may be serious this time.

Earlier this year, 38 Republican Senators voted against raising the ceiling [doing] so, knowing full well that they would be outvoted and that the limit would be raised despite their “objections.” That way, they could return to their Congressional districts, claiming some semblance of fiscal responsibility. Their vote didn’t matter so much back then… but with the Republicans having wrestled control of the House of Representatives last week, it sure does now. [It is a crisis in the making.]

[This year's vote] throws up an interesting dilemma. The Republicans – and particularly the Tea Party candidates who ran on a platform of cutting spending and the deficit – will have a very difficult choice to make. Either go back on their word and vote for an increase in the debt ceiling, or vote against it and run the risk of a financial crisis – a calamity.

It’s still early, but some Senators are already threatening to vote “no” – [to set the groundwork for the crisis in motion].

Senator-elect Rand Paul of Kentucky has indicated that he won’t vote in favor of raising the debt ceiling.
South Carolina Senator Jim DeMintsaid he won’t vote to raise the limit unless it’s combined with some plan to balance the budget, return to 2008 spending levels and repeal President Obama’s health care plan.
Utah Senator-elect Mike Lee, when asked if he’d vote against a debt ceiling increase, even if it leads to a government shutdown answered, “It’s an inconvenience. It would be frustrating to many people and it’s not a great thing, yet at the same time, it’s not something we can rule out.”
Republican National Committee Chairman Michael Steele told CNN, “We’re not going to compromise on raising more debt or the debt ceiling.”

[Such a political strategy may prove to be the makings of a major crisis because the lay of the land is different these days than in the past]… In 1995, the Republicans threatened President Clinton with shutting down the government if he didn’t agree to their budget but Clinton vowed that he’d never agree to it, even if his approval rating fell to 5%. [In the long run] he won. [While] the government did, in fact, shut down the Republicans became the focal point of America’s anger and President Clinton’s approval numbers actually went up. [That was then.]

Flash forward to today. President Obama is likely aware of this history and while he may be willing to negotiate on spending cuts he will not repeal health care reform which is the hallmark of his Presidency so, for Obama, the situation in 2011 will be much worse than it was for Clinton in 1995. I’m talking about a crisis of major proportions, namely, a meltdown in the stock and bond markets!

Washington Style Rhetoric Could have Devastating Consequences on the Markets

Bruce Bartlett, a former advisor to President Reagan and deputy assistant secretary for economic policy at the Treasury Department under President George H.W. Bush, recently stated, “You introduce even the tiniest little bit of doubt into the minds of ultra-conservative investors and that’s potentially disastrous. It hurts our ability to raise money without a risk premium.”

The Senate likely doesn’t have the votes to defeat a bill to raise the debt ceiling, while the House does [but] in the end, it doesn’t matter. The bill doesn’t have to be defeated. A filibuster accomplishes the same thing. In fact, a filibuster is even more powerful than a “no” vote and the mere threat of a filibuster could spook investors badly enough to sell first and ask questions later.

Protect Yourself From America’s Debt Showdown

You need to go about protecting yourself now from the distinct possibility of such a calamitous event. Here are a few investments that will likely do well in the chaotic environment I just described…

Gold: The resilient yellow metal should soar as the U.S. dollar sinks and investors flee to safety. If you don’t want to own the metal itself, you can buy the SPDR Gold Shares Trust (NYSE: GLD) ETF, which serves as a close proxy to the price of gold bullion.
Short Treasuries (Option 1): Consider the ProShares Short 20+ Year Treasury (NYSE: TBF), which aims for a 100% inverse correlation to the Barclays 20+ Year U.S. Treasury Bond Index.
Short Treasuries (Option 2): If you’re a more aggressive investor, take a look at the ProShares UltraShort 20+ Year Treasury (NYSE: TBT). It seeks to obtain results that are double the inverse daily performance of the Barclays 20+ Year U.S. Treasury Bond Index. So if the index falls 10%, the ETF should gain about 20%.

Conclusion

Investors who are agile and aware of the potential debt ceiling landmine can grab profits by getting into the right investments at the right time. Additionally, the ensuing volatility may create buying opportunities for some of your favorite stocks, so be sure to put together a watchlist of stocks you’re interested in owning at lower prices.

From most crises comes opportunity – and this impending debt crisis is another such opportunity

* http://seekingalpha.com/article/236123-how-to-protect-yourself-from-the-crash-of-2011?source=email_the_macro_view

Editor’s Note:

The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.

Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

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Crisis

David Goldman: Major Spike in Gold Price Unlikely Anytime Soon

Editor — Wed, 23 Jun 2010 07:59:18 +0000

Despite gold’s move up to a new record, gold’s historical volatility is around 18%, compared to over 30% for the S&P 500. If gold and stock prices both embody systemic risk, why should their volatility diverge so much? Words: 482

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, provides below further reformatted and edited [..] excerpts from David Goldman’s (http://http://blog.atimes.net/) original article* for the sake of clarity and brevity to ensure a fast and easy read. Goldman goes on to say:

Who is Buying Stocks?
With the 10-year yield at slightly over 3% and the earnings yield on the S&P 500 at over 6%, it’s understandable why institutional investors who require some yield would buy stocks. Even if the miserable US employment situation persists and the housing market remains in the dumps, America’s stripped-down, cash-rich corporate sector should continue to churn out some profits. Unless another shoe drops in the sovereign crisis or the miserable US economy turns sharply downward, equity prices should chop sideways.

Who is Buying Gold?
Gold is a different matter. Central banks and other investors who do NOT require current yield but need to preserve value have a quandary. The US is financing its deficit on the balance sheet of the global banking system – that’s why the Treasury’s TIC data keep showing huge purchases of Treasuries out of London and the Caribbean – as well as the US banking system. Because high unemployment and collapsed home prices foster deflation, the continued debasement of the US currency through balance-sheet leverage makes it unattractive as a reserve asset.

So what alternatives are available?
a) The euro is in danger;
b) Japan’s government is warning that its national debt at 227% of GDP threatens an eventual sovereign crisis for the yen;
c) the Canadian loonies and Aussie dollars are tiny markets;
d) [gold.]

[Yes, gold, and , as such,] the central banks appear to be accumulating gold, slowly and steadily, buying on declines, and nudging the price up as gradually as they can in order to reduce their average cost.

That might be why we observe so little volatility in the gold price. The prospective buyers, namely the central banks, are so much larger than the gold market that they avoid actions which might cause price spikes.

*http://seekingalpha.com/article/210840-who-is-buying-gold-and-why-is-gold-volatility-so-low?source=article_sb_popular (David P. Goldman was global head of debt research for Banc of America Securities and earlier global head of credit strategy at Credit Suisse. He owns gold mining stocks, GLD, as well as some longer-dated gold futures. It’s a relatively small part of my portfolio, but insurance against serious trouble.)

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given.
- Sign up to receive every article posted via Twitter, Facebook, RSS feed or our Weekly Newsletter.

Six ETFs Every Investor Should Know About

Editor — Mon, 01 Feb 2010 03:29:09 +0000

I want you to get familiar with six of the most popular exchange-traded funds ( ETFs) that track key stock market benchmarks. You need to know their ticker symbols by heart … they’re the bread and butter in your ETF shopping cart. Words: 1015

In further edited excerpts from his original article* Ron Rowland (www.moneyandmarkets.com) goes on to say:

I’m NOT saying you should buy any of my bread and butter ETFs right now but if you want to be a successful investor, it’s a big help to know what’s available. If you do, you’ll be able to react more quickly when the time is right.

ETF #1: SPY
SPDR Trust is the granddaddy of all ETFs. Introduced in 1993, the SPY (that’s the ticker symbol) was the very first U.S.-listed ETF and tracks the S&P 500. This index of 500 large-capitalization stocks is a standard benchmark for the U.S. equity market.

When you buy shares of SPY, you get an instant portfolio of 500 domestic stocks covering every industry sector. Financials, technology, health care, energy … they’re all in there!

ETF #2: QQQQ
PowerShares QQQ used to be called the “Nasdaq 100 Tracking Stock” until the Nasdaq honchos decided to spin off their ETF business to PowerShares.

This can be confusing, so read closely: The name of the ETF is PowerShares QQQ, with three Q’s. The ticker symbol is QQQQ. That’s four Q’s. Clear enough? Obviously someone wants to keep us all on our toes. In any case, the QQQQ is based on the Nasdaq 100 Index. Note that this is not the same as the Nasdaq Composite Index that you typically see quoted in the news media. The Nasdaq 100 is a sub-set of the Composite, consisting of the 100 largest non-financial stocks in the index and is heavily tilted toward technology stocks. In fact, many traders look at it as nothing more than a large-cap tech benchmark.

ETF #3: DIA
The DIAMONDS Trust follows the Dow Jones Industrial Average, which is probably the best-known stock market proxy in the world. Unfortunately, the Dow is also mostly useless as a benchmark, at least in my opinion, and so are products like the DIA that attempt to follow the Dow. It has three big problems …

1. like the Dow, it’s very narrow with only thirty stocks. That simply isn’t enough to reliably represent the U.S. industrial economy, as the Dow purports to do.

2. the DIA excludes some key sectors like transportation and utilities. Dow Jones publishes separate indexes for those groups.

3. the Dow and the DIA are weighted by the share price of the component stocks rather than the market value. This was advantageous back in the days when you had to calculate things on the back of an envelope, but now it’s just outmoded.

Despite these issues, there are times when the DIA can come in handy. For instance, if you’re looking for an actively-traded proxy of mega-cap stocks, the DIA might be a good pick.

ETF #4: IWM
The IWM is the iShares Russell 2000 Index Fund. What’s the Russell 2000? You already know the answer if you’re a fan of small-cap stocks. Each year, Frank Russell Associates ranks all the stocks in the U.S. by their market value. Chop off the top 1,000 biggest stocks and consider the next 2,000. That’s the Russell 2000.

These are relatively small companies — but that’s the whole point! When the U.S. economy is booming, small-cap stocks usually lead the way higher and the IWM lets you buy hundreds of tiny stocks in one simple trade. The IWM should be a staple item for almost every investor. It’s easy to jump in and out as the economy fluctuates, and you get plenty of diversification. There’s no better way to play the domestic, small-cap stock market.

ETF #5: EFA
The iShares MSCI EAFE Index Fund is international because it’s based on the Europe, Australasia and Far East Index published by Morgan Stanley Capital International. The EAFE Index is designed to represent the entire developed world, excluding the U.S. and Canada. It includes Western Europe, Australia, Japan — the countries with modern stock markets and banking systems (in contrast to the emerging markets, which we’ll get to in a minute).

The list of countries in the index can change. Recently MSCI promoted South Korea and Israel to developed-market status, and stocks from those countries were added to the index and to the EFA.

The EFA is useful as a way to round-out a portfolio that already includes enough U.S. stocks. Say you own the SPY and the IWM, but you want to have exposure to the rest of the world. Add the EFA to the mix and you’re almost there. I say almost because there’s one final piece …

ETF #6: EEM
The EEM is the standard ETF if you want to trade emerging markets. These are places that only recently established economic ties with the rest of the world and are growing quickly. Markets like Brazil, Russia, India and China are good examples. MSCI produces an Emerging Markets Index as a benchmark for these markets, and the EEM lets you trade that index. This is a really handy fund because it’s often difficult and expensive to buy individual stocks in emerging markets.

The EEM is a quick and easy way to allocate some of your portfolio to emerging markets. Keep it on the tip of your tongue for the next time you’re ready to make such a move.

There you have them: SPY, QQQQ, DIA, IWM, EFA and EEM. These are the six ETFs every investor ought to know. Get familiar with them. Add them to your watch list, and be aware of how they could fit into your portfolio.

*http://www.moneyandmarkets.com/six-etfs-every-investor-should-know-2-35046 (Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil.)