by Addison Wiggin & Ian Mathias
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Feds spend hundreds of billions on banks, again… Doug Casey on fixing our broken government
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The age-old question, answered: When to buy and sell stocks?
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Two more bull markets raging on in China: IPOs and mining stocks
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Plus, a 5 Min. exclusive: “Trades of the Decade” from an elite list of Symposium speakers
A pop quiz to begin today’s 5, live from Vancouver: How much money did the U.S. government inject into the American “financial system” from June 30, 2009, to June 30, 2010?
Drumroll…
$700 billion.
That’s right… the same amount promised to the financial system in TARP, back in 2008, when they were literally on the brink of destruction. Over the last 12 months, as the S&P 500 rose as much as 30% (up about 15% now, after the summer correction), evidently banks, brokers and lenders needed another $700 billion… just trust ’em… really.
“The current outstanding balance of overall federal support for the nation's financial system… has actually increased more than 23% over the past year,” wrote TARP inspector general Neil Barofsky this week, “from approximately $3.0 trillion to $3.7 trillion — the equivalent of a fully deployed TARP program — largely without congressional action, even as the banking crisis has, by most measures, abated from its most acute phases.”
You’re supposed to feel better, we’re told, that most of the money went to Fannie, Freddie and the FHA.
Hence we arrive at one of the underlying themes of this year’s Investment Symposium: Government out of control.
At the sharpened edge of this sword is Doug Casey. Here’s how he suggested the government fix itself in yesterday’s general assembly… not exactly “News at 10” material:
“What should they do? Well, I have a nice list of pointers,” Doug mulled onstage:
1. Central banks, starting with the Fed, should be abolished. They serve no useful purpose. The U.S. has 260 million ounces of gold. That can be used to back what’s left of the currency. What price, I don’t know — $10,000 an ounce?
2. Urgently disband 95% of the government. I would go all the way, but I’m a gradualist. It’s not radical — it just means going back to the original ideas of the Constitution
3. Withdraw troops from all countries around the world. End the insane wars in Iraq and Afghanistan. Cut the military back about 95% too. All these V-2 rockets and carriers are just junk, expensive junk. Their main purpose is going to be excellent dive sites for people of the next century.
4. Abolish, totally, absolutely, the whole income tax and whole IRS.
5. U.S. government should default on the debt. That’s the honest way to handle it. They will likely do it subvertly with inflation over time, but I would prefer overtly.
“What are the chances this is going to happen? Slim to none, and slim’s out of town. It ain’t going to happen. Thus, they chose an uncontrolled collapse, not a controlled one.”
We suspect this is what Barry Ritholtz meant when he said he felt fatigued by all the “recession/depression porn” featured at this year’s Symposium. But hey… they’re plenty to be gloomy about. For more of Doug Casey’s brand of vitriol, you should check out the Roving Reporter presentation from yesterday’s Symposium. It’s free… just click here.
For some investment opportunities – from both Barry and Doug – read on.
The long-suffered financial reform bill was signed to law this week. President Obama put his John Hancock on the bill yesterday. There’s not a lot of mystery left in this thing… the Volker rule… consumer protection… trading and brokerage reform… you know the deal by now (if not, here’s a summary). The good stuff won’t come until the details are hashed out, which could take some time.
But here’s something juicy: The heads of Citigroup, Bank of America, Barclays and Morgan Stanley were invited to the bill signing… but not executives from JP Morgan and Goldman Sachs. Drama!
Traders have decided to buy stocks today. The Dow and S&P jumped up over 2% on good earnings from UPS and Caterpillar. Data this morning are decidedly not good: Existing home sales fell 5.1% last month and “leading indicators” fell 0.2%. But never mind those… buy, buy, buy.
Today’s gain, if it holds, will bring major indexes back to about break-even for the month.
One answer to the age-old investor’s question, “When should I buy and sell stocks?”
“Watch the percentage of stocks on an exchange above or below their 200-day moving average,” Barry Ritholtz suggested yesterday at his breakout session. Aside from his Internet blog fame, Barry is well-known for his quantitative analysis firm, FusionIQ, as evidenced here.
“You can use the NYSE, S&P 500, whatever. But when 80% of stocks on the exchange of risen above their 200-day moving average, it’s time to think about selling. When only 20% are above the average, it’s time to start putting together a list. Historically, when 15% of NYSE stocks are above the 200-day moving average, four out of five times it was a buying opportunity. In March 2009, 1% were above that average. When that happens, either the market is going to zero or it’s time to buy.”
Barry, on several occasions, expressed his dissatisfaction with how few buying opportunities are out there right now.
Chinese investors still see buying opportunities left and right. Such as:
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“Companies based in China or Hong Kong,” The Wall Street Journal reported Tuesday, “participated in $13 billion of outbound mining acquisitions and investments last year — 100 times the level in 2005, according to data tracker Dealogic.” Say again: Chinese consumption of metals miners has increased 100-fold in five years
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So far this year, China is one of the world’s worst stock markets and biggest IPO markets. Undeterred by the 25% fall of the Shanghai Composite, Chinese companies raised $31.8 billion for 171 initial public offerings in the first half… making China the biggest IPO market in the world. By comparison, the U.S. floated 64 new companies in the first half, raising about $9 billion.
Last today, a real treat for you, dear reader. There was a brief moment of sobriety in last night’s Whiskey Bar panel discussion when members of the panel were asked for their personal “trade of the decade.” Here’s what they said:
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John Maudlin — Buy emerging markets, sell sovereign debt… but not now. Treasuries are going to go lower in the short term
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Andrew Lowenthal — John is 100% right: Rolling over U.S. debt is going to be so much easier than what people think… it’s too early to short Treasuries
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Eric Kraus — By resource producers in places where people are afraid to invest. Short finance sectors of developed countries
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Barry Ritholtz — Short the euro, long stocks in 2016, when the next bull market begins
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Byron King — Sell the euro: It’s doomed, just a question of time. Buy crude oil. There’s just not enough of it. I’m long the Tea Party, too
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Doug Casey — I’m inclined to own a lot of gold, cattle and agricultural land… keep it simple. I would short the euro, yen and U.S. stock market
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Gary Gibson — I own nothing. If I had anything, I would have dollars now, uranium later. Buy energy.
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Eric Fry — Short euro, long uranium
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Porter Stansberry — There are just too many good shorts. Short Treasuries, especially in U.S. and Italy. Buy gold, silver, timber and super-high-quality blue chips when they yield 10% or more
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Chris Mayer — Short the state of California and Illinois. Long uranium and high-quality farmland.
There you have it. If we had to drum up a consensus pair trade at this year’s Symposium, it’d likely be short the euro, buy energy and emerging markets. But for truly specific advice, including minute-by-minute recordings of all the spectacular presentations, the MP3/CD set is your best bet. It’s priced to sell for the rest of the week… get yours here while it’s still discounted.
“Did Rick Rule give a specific stock pick this week?” a reader asks.
The 5: Heh, if there’s any “problem” with Rick Rule, it’s that he might give too many stock picks at the Symposium. Every year, this editor comes home with a list of “stocks Rick likes” so long I don’t know where to start.
That being said, he owns a very large stake in Ram Power, a geothermal producer, and is overtly bullish on geo companies.
Want some more? Check out the MP3/CD set.
“I appreciate the updates on the FDIC bank closures,” another reader writes, “and I certainly am curious about how the FDIC plans to cover their rather significant expected losses without a loan from Treasury.
“But I must take issue with something that The 5 continually harps on when discussing the bank closures. While for complete transparency it would naturally seem that the FDIC should make public their list of problem banks, I feel that this information is not disclosed for good reason. The justification for the FDIC's existence is to avoid runs on banks that could shut down even a healthy bank (See this study that, although sponsored by the Minneapolis Fed, really does ring true.)
“The FDIC does an excellent job of closing banks in a relatively seamless fashion, and depositors are typically able to access their savings within one business day or less of their bank's closure. This is largely due to the fact that they are able to systematically plan their closures of banks without the urgency necessitated by a bank panic that might be caused by releasing their ‘problem list.’ Also, in the 200-plus banks that have been closed, I doubt that one person's deposits have been lost (even those above the $250,000 limit).
“Whether I agree or disagree with your opinions, though, I really do enjoy the daily read, so keep up the good work.”
The 5: That was some very polite griping. Cheers.
Here’s this editor’s beef with the FDIC: By publishing a problem bank list, they assume the right to make you afraid (or confident). By not naming names, they’re keeping you in the dark. There’s something manipulative about that combination… either be upfront and totally transparent or keep it the whole problem list under your hat.
“Since the FDIC deposit insurance limits are now $250,000,” our last reader writes, “then I would say that that person who has over the $250,000 coverage limit (or maybe even 10% of that in savings) should be more concerned about his or her bad investing, as they could be investing in the oil sands or energy stocks mentioned during the Investment Symposium.
“If that person has to worry about ‘protecting their savings’ because they are over the $250,000 limit and, say, if this is some sweet little old lady, then maybe she needs a good financial administrator to oversee her financial affairs…say like someone for The 5 Min. Forecast. Just a thought!”
Best,
Ian Mathias
The 5 Min. Forecast
P.S. Here’s our latest and greatest Roving Reporter presentation from Vancouver. Our crack team of reporters and writers are doing a fine job at providing thorough daily summaries of what’s going on… far more detailed and specific than our humble 5 Min. Check out today’s — which includes Patrick Cox’s favorite Biotech play — right here.