August 21, 2014
- Crude at its lowest since January, and at a critical juncture…
- The chart that reveals Russia’s gold grab
- Looking up Down Under
- The trigger for World War III the media don’t tell you about
- The Fed’s very boring meeting… bedbugs invade the bond king’s castle… real-world cost of living comparisons… and more!
Crude has tumbled to another seven-month low. As we write, a barrel of West Texas Intermediate fetches $93.49.
“That’s a 10% drop in less than 45 trading days,” our Matt Insley points out.
Nice if you’re driving somewhere for Labor Day — AAA’s national average is $3.44 a gallon, down 13 cents in a month — but what does it mean if you have energy shares in your portfolio?
“Take a look at the five-year price action in crude oil,” says Matt:
“The past six times prices tested the lower end of oil’s uptrend, we’ve seen a rebound,” he goes on.
Each of those six spikes coincided with strife in the Middle East. But when ISIS burst into the headlines in June, the reaction was more muted… and it didn’t last long.
“Right now,” says Matt, “we’re going to see an important test for oil. If prices can’t find support above the $94-95 range, we’ll be in uncharted territory. That’s when we’ll have to rejigger our short-term price outlook for oil.
“But with history on our side, I’m betting on a bounce. If we can maintain support around the $95 level, we could be in for a short-term rebound to $100 per barrel as chart technicians and momentum traders jump on board. Indeed, if there’s a bounce, I’ll be looking for buys!”
Matt’s readers have had great success playing the ups and downs of the energy markets since he launched Real Wealth Trader six months ago.
- “Great trade! I picked up four contracts. Just sold all four for $4,571.96 profit (almost 250%) in a little over two months. Thanks so much!
- “I bought into Oasis at $2.67 and sold at $9.18, for a 233.6% gain. I am up 76% in my brokerage account in three months. Keep them coming!
- “Got into this trade at $1.30. Just sold at $2.52. Almost doubled my money in under a month!”
Remarkably, Matt is unsatisfied with this performance. So he’s raised the bar on himself. As we mentioned yesterday, he’s out to make his readers a total of $1 million in profits before year-end.
That’s four months and 10 days from now. I’ve worked with the guy for more than seven years, and I have every bit of confidence he can pull it off. Don’t miss out on your share of the $1 million — click here to claim your share.
Stocks are a mixed bag this morning. The Dow and the S&P 500 are both up — in fact, the S&P is reaching into record territory — but the Nasdaq and small-cap Russell 2000 are down.
The indexes closed higher yesterday after the release of minutes from the Federal Reserve’s July meeting. Understand, Fed minutes are not like the minutes of your local sewer commission. They’re not an objective record of who said what. They’re carefully massaged and thoroughly politicized. And yesterday, they were a snooze. We can sum up the discussion thus…
“Hey, how soon should we raise interest rates? It’s been almost six years now.”
“Uh, I don’t know, the economic numbers are improving but they’re still pretty lousy.”
“OK, well let’s wait for some more numbers to come in before we commit to anything.”
“Sounds good. Where are we going for lunch?”
Speaking of economic numbers, we have a bunch today. Some of them are even illuminating…
- First-time unemployment claims: Back below 300,000 last week — almost a “normal” economic “recovery”!
- Existing home sales: Up 2.4% between June and July. But year over year, it’s a 4.3% decrease
- Philadelphia Fed survey: This measure of manufacturing in the mid-Atlantic has soared to a 3½ year high. But within the report, the trends are worrisome — growth in new orders is slowing appreciably. Employment growth is also slowing down
- Leading economic indicators: This gauge from the Conference Board jumped 0.9% in July, the biggest rise in four months. Credit goes to job growth, even if the jobs are low-wage and part-time…
Hmmm… Not impressive, but no sign of impending recession. Ditto for the Philly Fed’s State Coincident Index. It’s a mashup of four employment figures from all 50 states. Somehow, it’s managed to forecast every recession since the Carter administration. Readings below 50 are a warning signal. The latest number released yesterday was 72.
Precious metals traders used the Fed minutes as an excuse to unload gold. The Midas metal has been on a steady slide since 2:00 p.m. yesterday. At last check, the bid was $1,279.
Meanwhile, Russia’s plan to diversify away from the dollar is moving right along. The central bank acquired another 300,000 ounces of gold last month.
Russia is also amping up its efforts on the mining front. Russia is set to surpass Australia as the world’s No. 2 gold producer this year, according to Australia’s Gold Royalty Response Group. China, pursuing its own aggressive gold accumulation, is No. 1.
On the subject of Australia, “Its economy has been on fire lately,” says our income specialist Neil George.
“Industrial production shows recent gains nearing 6%. Australia’s also boosting its exports to resource-hungry Asia, pushing Australia’s gross domestic product growth over 3%.”
Neil has a long history working the stock and bond markets Down Under, and in New Zealand. “With a history of British common law, a skilled workforce and ample natural resources, these markets offer plenty of great companies that pay great dividends.
“With so much going for it, it’s no wonder the Australian dollar is up 8% against the U.S. dollar. That means U.S. investors in Australian stocks are making currency gains on top of capital gains and dividend payouts.” Two Australian plays in Neil’s Lifetime Income Report are up more than 30% so far this year, with dividends of 5.3% and 6.7%…
[Ed. note: Less than 36 hours remain in which to collect a $1,000 check to try out Neil’s premium income advisory. It will walk you step by step through a method with which you can pull down up to $2,485 in monthly income. If you want this check, you have to sign up before midnight tomorrow.]
As if there weren’t already enough trouble in the world — Ukraine, Iraq, Gaza — two of the world’s nuclear-armed powers are at loggerheads.
China and India fought a border war in 1962. Ever since, the two countries have remained in a standoff over disputed territory — arid windswept plateaus 15,000 feet above sea level and even higher. Most of the time, the standoff is quiet, even friendly…
But not always. The AFP newswire tells us “Chinese troops have advanced in recent days into disputed territory claimed by India, echoing a similar incursion last year that raised tensions between the two rival giants.”
The trouble last year blew over. Maybe it will this time too. But we wonder.
The veteran foreign correspondent Eric Margolis chronicled this standoff in his 2000 book War at the Top of the World. He also wrote of a 1983 meeting with Chinese military brass in Beijing. “The Chinese security officials told me that they anticipated a military clash with India in the Himalayas or Karakorams early in the 21st century.”
We mention this only so you’re not surprised if it comes to pass…
Trillions of dollars under management are not enough to keep bedbugs away.
Or so we conclude from the news that the New York offices of Pimco have been infested. Pimco is best known as home to the world’s largest bond fund, run by “the bond king” Bill Gross. The firm manages $1.97 trillion in assets.
“Our New York office is addressing an isolated issue with insects, and as a precautionary measure the firm is fumigating certain areas of the office space,” said a spokesman yesterday.
Pimco’s Manhattan location is in the Paramount Plaza at 1633 Broadway. It is hardly alone in its plight. “Two weeks ago,” Reuters tells us, “three New York City subway trains had to be fumigated after riders and staff spotted bedbugs in the cars.”
“We just moved to Delaware, and the value of our dollar jumped because of the absence of a sales tax at the local stores,” a reader writes. We got a healthy response after we shared a map from the Tax Foundation yesterday comparing the cost of living among the 50 states.
“When buying big-ticket items, the lack of sales tax really counts! I am sure the store owners appreciate not being an arm of state government.”
“We saw a huge change when moving from the Seattle area to the Oklahoma City area four years ago,” writes another.
“Along with the housing dust-up, we found a larger house that was more than two times less than our smaller Seattle home — prices here had hardly dipped, and buying a mortgage was cheaper than renting per month.”
“I live in the second largest city in Oklahoma,” a reader writes from Tulsa, “and just spent one week in Colorado in some of the smaller vacation cities, and in Denver too.
“It definitely is a much more expensive place to live. Gasoline was approximately 20% higher, soft drinks at the convenience store almost 50% higher and hotel rooms about 20-30% more expensive.
“Taxes on rental vehicles at the airport, all eight or nine of them, are about 50% of the cost of the vehicle — they are 30% of the vehicle cost where I live.”
“Whenever we go downstate to visit Mom,” a reader writes from Northern California, “we go shopping and load up the car. The savings more than pay for the fuel for the 450-mile trip. The difference between the San Francisco Bay area and that part of valley is striking.
“Here in the Land of Smiles,” writes a reader in Thailand, “my fiat dollars, once converted into fiat baht, seem to go quite far, especially in comparison with places like Taxifornia.
“However, they certainly don’t go as far as they did when I moved here a little over six years ago. Whenever I hear a local complain about prices, I just suggest they write their thank-yous to good ole ‘Helicopter’ Ben and the folks at the USSA Fed.”
“Ha, nice graphic — another worthless study,” writes a party pooper.
“Isn’t that the basic error of economists to take one specific Item, hold it constant against everything else and see how it changes as compared with another item? The concept is ridiculous.
“Economics are not static, and neither are wages, taxes, gasoline, food, etc. They all vary from
place to place. My salary earned in Colorado wouldn’t even pay for rent in New York.”
“Sure, I will just take my $100 I earned today in Washington state and buy my groceries and gas in Mississippi,” another piles on.
“This is a meaningless study due to cost of living and wages paid in various states. Like real estate, labor is a local market. This appears to be more government hacks with too much time on their hands to produce fancy charts and stir up the entitlement voting base. Shame on you for making me point it out.”
The 5: Huh?
We’re hard-pressed to think of another time we’ve published something so innocuous that generates this level of scorn.
Two and a half years ago, Agora Inc. founder Bill Bonner analyzed a similar study. We feel like sharing an extended passage:
“Tired of running out of time and money? Scrimping and saving just to make ends meet? Try moving to Harlingen, Texas. The cost of living there is only about 40% of the cost of living in Manhattan”…
“You can live more cheaply in a place like Harlingen. You’re almost guaranteed to lower your spending, because there’s not much there to spend money on.
“We’ve never been to Harlingen, so maybe we’re wrong, but we imagine it is a pretty slow place. Few fancy restaurants. Few theatres. Few luxury shops. Which makes it hard to part with money…
“Back in the time of the Great Depression, millions of Americans were still not completely caught up in the money economy. Many still lived on the land. They kept pigs and chickens. They tended their own gardens and ‘put up’ their own canned goods. They cut their own wood to heat their houses. They pumped water from their own wells. Many still made their own clothes.
“When the Depression came, they could hunker down and wait it out.
“But today, the developed world is in a Great Correction… At this rate, it could take 10 years or more to get household debt down to more comfortable levels, say, around 70% of disposable income.
“But the average household can’t wait 10 years for deleveraging to do its work. Heck, it can’t even wait two months. Both parents work. They’ve got two cars. And two mortgages. Money in; money out. 24/7…
“No garden. No firewood. No chickens. No time to wait. No time to sit still. Just bills…bills…bills…
“They’ve got to work…they’ve got to earn money…they’ve got to spend…
“They can’t do nothing.
“They should move to Harlingen.”
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Speaking of Bill, his new book still isn’t available at Amazon or brick-and-mortar bookstores. For now, there’s only one way to get it. If you want to learn how the world really works… or if you just want to be a better person… or both… you can get an electronic copy only minutes from now and receive a limited-edition hardback on your doorstep in a few days. Here’s where to act.