Goldman Goes Super-Bull (Huh?)
Goldman Sachs (the undisputed king of banking criminality) came out this week and said that it's time for everyone to dump bonds and buy stocks because equities are going to rise for the next TWO years. Now, let me get this straight. The market has been on a tear for the last 3 months (up some 30% since November), and AFTER such a move (a move that in a "normal" market might take a year), Goldman is telling us to “pile into stocks!" There must be something wrong with this picture – yes? But honestly, this week, Goldman had their head of equities on CNBC, and he was so bullish it was mind blowing. This gentleman made his mark by coining the term "BRICS" for the resource countries, and during the big market run up of 2007, he was a hero. He also said that the BRICS are going to do well, but other new emerging markets will trump them and the “world is going to have an orgy of growth.” He said that US equities will benefit, and we could see a run unlike anything we've ever seen. In the report itself, Goldman expects global growth from 2010-19 to be the fastest of any decade between 1980 and 2050! Really? Didn't Greece just dissolve? Isn't Germany wobbling under the weight of carrying the EU? Aren’t Spain, Portugal, and Ireland (and probably the UK) in the dustbin of insolvency? Isn't China slowing, despite building cities with no inhabitants? Isn't the US struggling with high unemployment and falling housing? Where is the record growth going to come from – Afghanistan, Iran, and Pakistan?
- This week housing applications fell 7.4% for a 6-week slide. Refinancing’s fell 9.2%. In the housing starts column, the only things being built were multi-family units.
- COAL is also weak. The manufacturers are seeing non-existent markets for spot and near-term coal as utilities continue to wrestle with unexpected generational declines. (Which means the demand for energy is dropping.) So how does that ‘square’ with a bustling, growing economy?
- Also, this week oil consumption DECLINED to 1995 levels.
Then Goldman’s Chief Economic Strategist, Jan Hatzius, who is German, gave an interview to Handelsblatt, and his views were 180 degrees apart from Goldman’s Equities Strategist. To quote Mr. Hatzius: “I do not see a strong comeback in the U.S. We expect a further decline in home prices by three to four percent and no stabilization until 2013. The surplus is still large. And I expect more QE in the first half, because the mid-life extension program of the Fed - also known as "Operation Twist" - is expiring. So it makes the most sense to launch another QE as the successor program around the mid-point of 2012.”
So one GS employee says the world is going to explode in growth, while another says we're mired in a mess and need QE. Meanwhile the real facts show our economies are puking. Either GS is completely lying to us, or the fact-based news about housing, oil, energy and employment are wrong. My guess is that no matter what kind of runs and drops we get in the near term, the big damage is coming shortly after the New Year. Long about the time the next President is sworn in, and all the ills we point to are found to be festering with no solutions.
By the way, I don't believe GS (Goldman Sachs) for a second, but I do believe in one GS (Gold and Silver). Many have asked why gold and silver seem to be "stuck". I think that one of two things will happen in the foreseeable future. (1) We will have full out deflation, meaning a crash, and gold does well in a crash. Or (2) we will have rampant inflation that touches on hyperinflation and gold does well during those times. Gold hit my 2011 target and surpassed it by a bit. I called for a total top at 2,400 and I think it still gets there. But this entire current ‘chop’ is just Gold and Silver responding to manipulations by various central banks.
Mr. Corzine – you should be ashamed. Jon S. Corzine – MF Global’s Chief Executive Officer – who previously testified that he did not know where all the money went? Well, Friday after the market closed – there appears to be proof that not only did he KNOW where the money went – he ORDERED it! According to Bloomberg: “Jon S. Corzine, MF Global Holding Ltd.'s chief executive officer, gave "direct instructions" to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage's JPMorgan Chase & Co. accounts in London, according to an e-mail sent by a firm executive. Edith O'Brien, a treasurer for the firm, said in an e-mail sent the afternoon of Oct. 28, three days before the company collapsed, that the transfer of the funds was "Per JC's direct instructions," according to a copy of a memo drafted by congressional investigators and obtained by Bloomberg News.”
In terms of the market, everyone knows that at some point QE3 or some form of new alternative will be coming from the Fed. Operation Twist ends in June, but they really can't let it end. Operation Twist was the latest game the Fed played to keep interest rates low, but market forces have been inching rates up. The Fed can’t let rates rise because that would cripple both the housing and banking industries. Therefore, a new twist on QE must be coming around June. Because each one of these Fed schemes ends up giving banks money to play with, the market has continued to rise. And of course Obama and the Fed both want a higher market as some form of evidence the economy is healing.
This week we did get a "mini" correction. From the market high of 13,298, it put in a low of 13,002 during the intra day on Friday. Round it off to a 300-point swing from high to low. It feels like we could lose another several hundred points, but with The Ben Bernanke lurking - we could open Monday and fall 150, Tuesday fall another 100 and on Wednesday The Ben Bernanke could talk about conjuring up a plan to replace The Twist and we would gain 350.
They put in a green day Friday, but it didn't recapture 1400 on the S&P, which isn't a great sign. The indicators suggest a bit more selling, and therefore we have cut our short term trading account down to almost nothing. If they get the S&P back over 1400, chances are good we've seen all the selling we're going to see.
There will be more stimulus, and the market will run higher when it hits. It could run right on up into the election, but I have a sneaking suspicion that right about now is the perfect time for them to toss in the correction. They could let the market fall 8%, and that way when the stimulus hits – the market is free to run.
I'm quite neutral right here and now.
I’ll beginning this segment with a quote I heard from a candidate – Mitt Romney. (I’m not a Romney supporter – I just liked the quote ☺ ). Gov. Romney was asked a question at a recent rally: “So you are all about freedom and happiness, well you know what would make me happy – more Free Stuff!” I actually couldn’t believe what I heard. Gov. Romney’s response was: “Hey, if you're looking for more Free Stuff, Vote for the Other Guy".
We’re currently holding:
- ANR – in at 15.88 (currently 16.14) – stop at entry,
- GLD (ETF for Gold) – in at 159.49, (currently 161.31) – no stop, AND
- SLV (ETF for Silver) – in at 28 (currently 31.32) – no stop.
To follow me on Twitter and get my daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
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