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3 Little-Known Government Projects That Could Change the Face of Tomorrow

December 10th, 2010

3 Little-Known Government Projects That Could Change the Face of Tomorrow

Not many people have heard of the Defense Advanced Research Projects Agency, DARPA for short, much less know what it does. But this little-known government agency was created by the Department of Defense in the late 1950s to ensure the U.S. military's technical superiority. Even more interesting to investors, it also controls about $3 billion in research funds that act like seed capital that is strategically distributed to the private sector in hopes of creating technological breakthroughs that can be put to use by the military.

As the Chief Strategist of Game-Changing Stocks, I'm always on the lookout for “the next big thing.” That's why it's a no-brainer to look through DARPA's current projects and ideas for potential blockbusters.

The agency tends to be the ground floor operation for broader Department of Defense goals, and if you can find a trend in new project ideas, you can get a good sense of companies that are worth following as they develop their technologies and bring a product to the market. This is kind of intel I live for.

But what makes this angle unique is that these breakthrough companies hired by DARPA offer a more defensive play than similar businesses. In this uncertain economy, it's very helpful to have a stable, reliable partner like the U.S. government. Uncle Sam is picking up the tab for the project they're working on — pretty nice if you're a small company!

Below, I've highlighted a few technologies I've found looking through DARPA's files that look like ground-breaking ideas if all goes according to plan. While it can take considerable time to take a new idea from “lab to fab” (laboratory to fabrication), the companies below already have a good start in their respective fields.

  • Neovision2: An effective military operation demands superior intelligence — both human intelligence (called “HUMINT”) and signals intelligence (“SIGINT”), the latter meaning radar and satellites. While the SIGINT problem has been solved by dozens of orbiting satellites, it's not perfect because the data still has to be analyzed and can never be as precise as human observers. But that mission is highly risky.

What the Pentagon wants from contractor Evolved Machines is a sensor that mimics HUMINT, one that can see and instantly interpret what's going on, identifying threats and convey that information in real-time to battlefield commanders. “Integration of recent developments in the understanding of the mammalian visual pathway with advances in microelectronics,” DARPA says, “will lead to the production of new revolutionary capabilities from the ground to the sky that will provide a new level of situational awareness for the warfighter.”

  • Blood Pharming: Blood used in combat zones is donated in the United States and is usually up against its expiration date (about 28 days) by the time it ships, let alone by the time it might be used. So the military wants to be able to produce transfusable universal red blood cells that can be grown in an automated, portable cell culture. In other words, one guy in the platoon wears a backpack that can grow blood. The company building this system is Cleveland-based Arteriocyte.

    Uncategorized

VIX Futures Now Opening at 9:20 a.m. ET

December 10th, 2010

Effective tomorrow, December 10th, VIX futures will be open for trading as of 9:20 a.m.

“Extended trading hours for VIX futures will give investors the ability to more efficiently mitigate risk and establish or offset positions that may be impacted by potential market-moving events such as overnight news, banking actions, or key economic reports released prior to the general market open,” explained Andrew Lowenthal, Managing Director, CBOE Futures Exchange.

Of course VIX futures are the underlying security for all VIX options and exchange-traded products.

For more information, check out the CBOE Futures Exchange (CFE) press release.



Read more here:
VIX Futures Now Opening at 9:20 a.m. ET

OPTIONS, Uncategorized

VIX Futures Now Opening at 9:20 a.m. ET

December 10th, 2010

Effective tomorrow, December 10th, VIX futures will be open for trading as of 9:20 a.m.

“Extended trading hours for VIX futures will give investors the ability to more efficiently mitigate risk and establish or offset positions that may be impacted by potential market-moving events such as overnight news, banking actions, or key economic reports released prior to the general market open,” explained Andrew Lowenthal, Managing Director, CBOE Futures Exchange.

Of course VIX futures are the underlying security for all VIX options and exchange-traded products.

For more information, check out the CBOE Futures Exchange (CFE) press release.



Read more here:
VIX Futures Now Opening at 9:20 a.m. ET

OPTIONS, Uncategorized

Is The Chinese Bubble About to Burst?

December 10th, 2010

After QE2, analysts were looking for possible consequences of the Federal Reserve Bank’s actions. What has become apparent is that the Fed has created another bubble in China. Investors globally have transferred devalued US dollars and euros to buy Chinese property and equities. China has had to combat imported inflation with rapidly rising asset prices. An influx of capital has caused a real estate bubble, a rise in costs of basic goods, and excessive speculation in the commodity markets. The Chinese central banks will be observing the inflation data which should be coming out this weekend and will be compelled to act aggressively to prevent China from a bust similar to the housing crisis which occurred in the United States in 2007. Yesterday’s IPOs showed that irrational exuberance is here once again, none since I have witnessed since the late ’90s.

I never grew so fearful of the Chinese market until I began hearing the fanfare around yesterday’s IPOs. I began to read the marketing language and began to have strong feelings of déjà vu. I felt like I was reading something that I read almost 10 years earlier with a company called boo.com, which was labeled the next Amazon (AMZN). They were also underwritten by Goldman Sachs (GS). Boo.com burned through $185 million in 18 months and did not make any profits. Investors were wiped out. {FLIKE}IPOs are a measure of market sentiment. Companies come to the market as the future looks bright and they’re expected to expand. A pattern of IPOs begins to show over-enthusiasm and possible peaks in the market. The number of IPOs is a useful tool for technicians to confirm tops and troughs in the market.

Investors are obsessed with China, just like the IPOs in the late ’90s right before the tech bubble burst. They piled into two new IPOs, Youku and Dangdang, which are not showing much of any profit and only offering panaceas. This year approximately one in four IPOs are Chinese companies. Investors are expecting exponential growth, and even though these have been marketed as the next YouTube (GOOG) and Amazon, both companies have a long way to go; they are currently not making much profit at all. Lessons should be learned from the tech bubble: Highly marketed IPOs should be viewed as a contrarian signal. Ironically, these latest IPOs come at a time when the Chinese central banks are committed to fighting excessive speculation.

International markets are going to carefully examine China’s inflation data (to be released this weekend). This information should evoke central bank response by early next week.

The chart above shows the rapidly accelerating price appreciation of housing markets in China’s major metropolitan areas. China has already implemented regulations to curb rampant speculation in their housing market.

Many investors are unaware of the rising dangers of externally generated inflation. Month after month applications to start real estate operations from foreign entities are doubling. The carry trade has become apparent. Investors are exchanging easy, electronically printed money for Chinese assets.

The chart above illustrates the China 25 Index (FXI) and shows a possible “V” reversal top and negative divergence. This is when price breaks into new highs, then with no warning, the price breaks the uptrend and support levels. The FXI broke through the 50-day moving average and has already failed to regain the 50-day on the upside once. Until it regains that 50-day, I am cautious on commodities and equities. Ideally a break into new highs should show some follow-through strength, and this has not occurred. The Chinese markets are showing weakness, and this effect has morphed over to the precious metals and commodity markets.

It would be naive to think that a surprise hike in rates and a downturn in China would not put pressure on gold and silver. Gold (GLD) and Silver (SLV) are beginning to show signs of bearish reversals after a powerful move. Open interest in gold futures peaked on November 9, a major reversal day. A tightening policy in China could keep buyers away for a significant amount of time or until prices come down to a more reasonable level.

The demand and consumption of raw materials in China has a major impact on commodities. It used to be that one had to watch a sneeze from the US, but precious metals investors need to also be aware of a sniffle from China.

Read more here:
Is The Chinese Bubble About to Burst?

Commodities, Real Estate

Is The Chinese Bubble About to Burst?

December 10th, 2010

After QE2, analysts were looking for possible consequences of the Federal Reserve Bank’s actions. What has become apparent is that the Fed has created another bubble in China. Investors globally have transferred devalued US dollars and euros to buy Chinese property and equities. China has had to combat imported inflation with rapidly rising asset prices. An influx of capital has caused a real estate bubble, a rise in costs of basic goods, and excessive speculation in the commodity markets. The Chinese central banks will be observing the inflation data which should be coming out this weekend and will be compelled to act aggressively to prevent China from a bust similar to the housing crisis which occurred in the United States in 2007. Yesterday’s IPOs showed that irrational exuberance is here once again, none since I have witnessed since the late ’90s.

I never grew so fearful of the Chinese market until I began hearing the fanfare around yesterday’s IPOs. I began to read the marketing language and began to have strong feelings of déjà vu. I felt like I was reading something that I read almost 10 years earlier with a company called boo.com, which was labeled the next Amazon (AMZN). They were also underwritten by Goldman Sachs (GS). Boo.com burned through $185 million in 18 months and did not make any profits. Investors were wiped out. {FLIKE}IPOs are a measure of market sentiment. Companies come to the market as the future looks bright and they’re expected to expand. A pattern of IPOs begins to show over-enthusiasm and possible peaks in the market. The number of IPOs is a useful tool for technicians to confirm tops and troughs in the market.

Investors are obsessed with China, just like the IPOs in the late ’90s right before the tech bubble burst. They piled into two new IPOs, Youku and Dangdang, which are not showing much of any profit and only offering panaceas. This year approximately one in four IPOs are Chinese companies. Investors are expecting exponential growth, and even though these have been marketed as the next YouTube (GOOG) and Amazon, both companies have a long way to go; they are currently not making much profit at all. Lessons should be learned from the tech bubble: Highly marketed IPOs should be viewed as a contrarian signal. Ironically, these latest IPOs come at a time when the Chinese central banks are committed to fighting excessive speculation.

International markets are going to carefully examine China’s inflation data (to be released this weekend). This information should evoke central bank response by early next week.

The chart above shows the rapidly accelerating price appreciation of housing markets in China’s major metropolitan areas. China has already implemented regulations to curb rampant speculation in their housing market.

Many investors are unaware of the rising dangers of externally generated inflation. Month after month applications to start real estate operations from foreign entities are doubling. The carry trade has become apparent. Investors are exchanging easy, electronically printed money for Chinese assets.

The chart above illustrates the China 25 Index (FXI) and shows a possible “V” reversal top and negative divergence. This is when price breaks into new highs, then with no warning, the price breaks the uptrend and support levels. The FXI broke through the 50-day moving average and has already failed to regain the 50-day on the upside once. Until it regains that 50-day, I am cautious on commodities and equities. Ideally a break into new highs should show some follow-through strength, and this has not occurred. The Chinese markets are showing weakness, and this effect has morphed over to the precious metals and commodity markets.

It would be naive to think that a surprise hike in rates and a downturn in China would not put pressure on gold and silver. Gold (GLD) and Silver (SLV) are beginning to show signs of bearish reversals after a powerful move. Open interest in gold futures peaked on November 9, a major reversal day. A tightening policy in China could keep buyers away for a significant amount of time or until prices come down to a more reasonable level.

The demand and consumption of raw materials in China has a major impact on commodities. It used to be that one had to watch a sneeze from the US, but precious metals investors need to also be aware of a sniffle from China.

Read more here:
Is The Chinese Bubble About to Burst?

Commodities, Real Estate

A Report on the Tax Deal Effects

December 10th, 2010

The news yesterday was all about the tax deal. Did President Obama drop the ball completely? He was against extending the tax cuts. How come he caved in? Will he alienate his voter base?

Or did he just pull a fast one on the Republicans? The tax cuts/unemployment benefit extension deal is a kind of “stealth stimulus,” say some commentators. It will stimulate the economy, with no need for another vote on Capitol Hill. The Tea Party people were dead set against any further stimulus. But there it is.

“Obama tax move lifts hopes for growth,” says The Financial Times. It will even eliminate the need for more QE, said one hopeful commentator. The dollar will be stronger as a result.

Stocks went up 13 points on the Dow yesterday – nothing at all, in other words. But gold fell $25.

But so far, bonds are telling us a different story. Yields on the 10-year T-note are over 3% – at 6-month highs. The feds have pledged to buy more than $800 billion worth of government bonds. And still prices go down. Go figure.

What we figure is that investors are wary. At least a fair number of them must be thinking what we’re thinking – that the authorities don’t know what they’re doing…that they are going to lose control of inflation…and/or that the economy is going to collapse despite all their stimuli and money printing.

The effect of the tax deal (assuming it is passed) will be to increase government spending and lower government revenues. That will produce a federal budget deficit, according to official sources, of more than 8%. Meanwhile, the states are looking at huge deficits of their own. With muni bonds falling, they will have a hard time raising more money and may be pushed into bankruptcy – roughly the same drama that is on the European stage.

While bonds fall, commodities soar.

“Investors pile into commodities,” says The Wall Street Journal.

Hmmm… They must be worried about inflation…or maybe they’re just speculating. It looks to us as though the feds are creating yet another bubble.

It’s a set-up, dear reader. Watch out for commodities and stocks. And oh yes, watch out for bonds too.

Bill Bonner
for The Daily Reckoning

A Report on the Tax Deal Effects originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
A Report on the Tax Deal Effects




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

A Report on the Tax Deal Effects

December 10th, 2010

The news yesterday was all about the tax deal. Did President Obama drop the ball completely? He was against extending the tax cuts. How come he caved in? Will he alienate his voter base?

Or did he just pull a fast one on the Republicans? The tax cuts/unemployment benefit extension deal is a kind of “stealth stimulus,” say some commentators. It will stimulate the economy, with no need for another vote on Capitol Hill. The Tea Party people were dead set against any further stimulus. But there it is.

“Obama tax move lifts hopes for growth,” says The Financial Times. It will even eliminate the need for more QE, said one hopeful commentator. The dollar will be stronger as a result.

Stocks went up 13 points on the Dow yesterday – nothing at all, in other words. But gold fell $25.

But so far, bonds are telling us a different story. Yields on the 10-year T-note are over 3% – at 6-month highs. The feds have pledged to buy more than $800 billion worth of government bonds. And still prices go down. Go figure.

What we figure is that investors are wary. At least a fair number of them must be thinking what we’re thinking – that the authorities don’t know what they’re doing…that they are going to lose control of inflation…and/or that the economy is going to collapse despite all their stimuli and money printing.

The effect of the tax deal (assuming it is passed) will be to increase government spending and lower government revenues. That will produce a federal budget deficit, according to official sources, of more than 8%. Meanwhile, the states are looking at huge deficits of their own. With muni bonds falling, they will have a hard time raising more money and may be pushed into bankruptcy – roughly the same drama that is on the European stage.

While bonds fall, commodities soar.

“Investors pile into commodities,” says The Wall Street Journal.

Hmmm… They must be worried about inflation…or maybe they’re just speculating. It looks to us as though the feds are creating yet another bubble.

It’s a set-up, dear reader. Watch out for commodities and stocks. And oh yes, watch out for bonds too.

Bill Bonner
for The Daily Reckoning

A Report on the Tax Deal Effects originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
A Report on the Tax Deal Effects




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

High Long Bond Yield Good News for Gold Holders

December 9th, 2010

The Financial Times brought up the interesting point that because bond prices are so insanely high (making bond yields so preposterously low), a one-percent change in yields would negatively impact the prices of bonds much more than a one-percent change if bond yields were higher, which I assume means in the normal 3-6% range.

Of course, this is just the simple arithmetic of relative percentage moves, and as such is of absolutely no interest to those of us who are not looking for easy math problems to solve, but only looking for the Easy Road To Riches (ERTR), which turned out to be to buy gold, silver and oil as a defense against the disastrous inflation in prices, and a Fabulous Money-Making Opportunity (FMMO) when thus capitalizing on it, when the evil Federal Reserve was massively and consistently increasing the money supply, and especially so when the evil Federal Reserve is creating more enormous amounts of new money to buy government bonds from someplace after a lot of banks, bankers and assorted middlemen get their cut, and “doubly especially so” when the purpose of the whole stinking, corrupt exercise is to finance monstrous amounts of government deficit-spending!

I was hoping that a financial publication would want to feature me by picking up on this FMMO idea of mine to buy gold, silver and oil when the Fed is acting so treacherously, how this FMMO has made spectacular returns over the last decade, and how it is such an idiot-proof investment that even a lazy idiot like me can make Plenty Mucho Money (PMM) by merely brainlessly betting on the fool-proof, sure-fire, guaranteed inflation in prices that comes from such staggering increases in the money supply. And 4,500 years of history backs my play, too!

Secretly, of course, I was hoping that Rolling Stone would beat them to the punch and choose to put me on the cover! Wow! My main reason is that my résumé (which I may soon be needing), in the section labeled “Other accomplishments,” currently lists “None.” How embarrassing!

If this Rolling Stone thing works out, I would be able to include on my résumé, “Chosen by Rolling Stone magazine as The Best Freaking Investment Advisor In The Whole Freaking World by merely recommending only gold, silver and oil, an article replete with candid photos of me lounging around the house, chasing stupid neighborhood kids off my lawn and that kind of stuff.”

Apparently, I am missing the point with all of this talk about how gold, silver and oil will go up because the filthy Fed is creating so much inflation. The point is, according to Morgan Stanley, that huge losses are looming, and “a one percentage point jump in 10-year Treasury yields could wipe roughly $1.6 trillion off US bond market value. If the yield rises three percentage points, bond market value drops by $4.7 trillion.”

What they don’t mention is that this massive $4.7 trillion loss is actually better than the $4.8 trillion loss you would expect from merely trebling the $1.6 trillion loss for the first percentage point, which is the arithmetic that we so blithely ignored at the beginning of this essay, proving once again that being stupid and lazy is costly.

And bonds are sure to go up, as, for example, Mark Lundeen of Lundeen’s Long-Term Market Trends newsletter writes “look at the recent 28% loss of principal in the February 2036 long bond, as the yield increased from 2.6% to 4.55%.” So how much money was lost with a recent 2% rise in yields? Yow!

And it gets Much, Much Worse (MMW) going forward, if history is any clue, as it inspires Mr. Lundeen to remark, “Before this bear market is over, I expect the old 1981 highs of 15% for US long bond yields to be exceeded.”

This 15% yield on the long-bond is Good, Good News (GGN) because it is at this point that gold will be selling near its high, whereupon we gold-bugs will sell our gold and buy bonds at their lows, reaping a fabulous yield to sustain us in the years to come as our wealth increases with the rising prices of our bonds as the economy slowly recovers over the years.

In the meantime, of course, the only thing I have going for me is that the Fabulous Money-Making Opportunity (FMMO) inherent in buying gold, silver and oil when the Federal Reserve is creating so much money while I wait for 15% yields on the long-bond, which is so obvious and easy that I shout, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

High Long Bond Yield Good News for Gold Holders originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
High Long Bond Yield Good News for Gold Holders




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

High Long Bond Yield Good News for Gold Holders

December 9th, 2010

The Financial Times brought up the interesting point that because bond prices are so insanely high (making bond yields so preposterously low), a one-percent change in yields would negatively impact the prices of bonds much more than a one-percent change if bond yields were higher, which I assume means in the normal 3-6% range.

Of course, this is just the simple arithmetic of relative percentage moves, and as such is of absolutely no interest to those of us who are not looking for easy math problems to solve, but only looking for the Easy Road To Riches (ERTR), which turned out to be to buy gold, silver and oil as a defense against the disastrous inflation in prices, and a Fabulous Money-Making Opportunity (FMMO) when thus capitalizing on it, when the evil Federal Reserve was massively and consistently increasing the money supply, and especially so when the evil Federal Reserve is creating more enormous amounts of new money to buy government bonds from someplace after a lot of banks, bankers and assorted middlemen get their cut, and “doubly especially so” when the purpose of the whole stinking, corrupt exercise is to finance monstrous amounts of government deficit-spending!

I was hoping that a financial publication would want to feature me by picking up on this FMMO idea of mine to buy gold, silver and oil when the Fed is acting so treacherously, how this FMMO has made spectacular returns over the last decade, and how it is such an idiot-proof investment that even a lazy idiot like me can make Plenty Mucho Money (PMM) by merely brainlessly betting on the fool-proof, sure-fire, guaranteed inflation in prices that comes from such staggering increases in the money supply. And 4,500 years of history backs my play, too!

Secretly, of course, I was hoping that Rolling Stone would beat them to the punch and choose to put me on the cover! Wow! My main reason is that my résumé (which I may soon be needing), in the section labeled “Other accomplishments,” currently lists “None.” How embarrassing!

If this Rolling Stone thing works out, I would be able to include on my résumé, “Chosen by Rolling Stone magazine as The Best Freaking Investment Advisor In The Whole Freaking World by merely recommending only gold, silver and oil, an article replete with candid photos of me lounging around the house, chasing stupid neighborhood kids off my lawn and that kind of stuff.”

Apparently, I am missing the point with all of this talk about how gold, silver and oil will go up because the filthy Fed is creating so much inflation. The point is, according to Morgan Stanley, that huge losses are looming, and “a one percentage point jump in 10-year Treasury yields could wipe roughly $1.6 trillion off US bond market value. If the yield rises three percentage points, bond market value drops by $4.7 trillion.”

What they don’t mention is that this massive $4.7 trillion loss is actually better than the $4.8 trillion loss you would expect from merely trebling the $1.6 trillion loss for the first percentage point, which is the arithmetic that we so blithely ignored at the beginning of this essay, proving once again that being stupid and lazy is costly.

And bonds are sure to go up, as, for example, Mark Lundeen of Lundeen’s Long-Term Market Trends newsletter writes “look at the recent 28% loss of principal in the February 2036 long bond, as the yield increased from 2.6% to 4.55%.” So how much money was lost with a recent 2% rise in yields? Yow!

And it gets Much, Much Worse (MMW) going forward, if history is any clue, as it inspires Mr. Lundeen to remark, “Before this bear market is over, I expect the old 1981 highs of 15% for US long bond yields to be exceeded.”

This 15% yield on the long-bond is Good, Good News (GGN) because it is at this point that gold will be selling near its high, whereupon we gold-bugs will sell our gold and buy bonds at their lows, reaping a fabulous yield to sustain us in the years to come as our wealth increases with the rising prices of our bonds as the economy slowly recovers over the years.

In the meantime, of course, the only thing I have going for me is that the Fabulous Money-Making Opportunity (FMMO) inherent in buying gold, silver and oil when the Federal Reserve is creating so much money while I wait for 15% yields on the long-bond, which is so obvious and easy that I shout, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

High Long Bond Yield Good News for Gold Holders originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
High Long Bond Yield Good News for Gold Holders




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

McDonalds MCD Hard Fall to Daily Support

December 9th, 2010

While scanning the stocks in the Dow Jones Index just now, a particular move in the stock price of McDonalds caught my eye that I wanted to share.

Let’s see the creeper power-up trend that gave-way to a ‘hard fall’ to a key daily support level.

It’s a good example of watching support as it develops.

Since the early August price breakout from the $70 level, share have been in a stable uptrend contained by the rising 20 day EMA as support all the way up.

The 20 day EMA is a great low-risk entry point (trail the stop under the 50) in the context of creeper-up trends like this.

Price also has been contained to the upside by a weak rising trendline, and we could say the price is rising in a stable trend contained within parallel trendlines or trend channels.

That’s neat and all, but the dynamic might be shifting, as evidenced by the three recent breakdowns under the stable 20 EMA and ’slam’ into the support of the rising 50 day EMA as shown.

While the other two drops to the 50 EMA were rough, today’s could be described as a stone-drop to the key support level.

It’s support because it’s held in the recent past but it also forms a near confluence with the lower Bollinger Band at the “round number” price level of $77.

It’s definitely something to keep your eye on if you’re trading or investing in this stock – a key bellwether for the retail fast food industry.

Going beyond price and moving averages, we see a spike in sell or downside volume (volume counted on down days) as well as a visual negative momentum divergence – both of which are bearish.

If $77 holds as support, then expect the trend to continue its melt-up (like cheese on a hamburger?) but in the event sellers push price down through the dual support at $77, look to the weekly chart for the next likely target to play for.

MCD Weekly:

Stated as simply as possible, look for the next level of support under $77 to come in at the $75 level – it’s the rising 20 week EMA.

Of course, if $75 comes in to play and fails to hold support, we could see a fall back to $70 to test THREE levels of key support:

The 50 day EMA, the Lower Bollinger Band, and the Prior Price Resistance Zone – all at $70.

Again, going beyond price, we see a similar non-confirmation (negative divergence) both short-term and long-term in both momentum (3/10 Oscillator) and Volume.

That’s not bullish, but none of those bearish targets come into play if the trend continues and supports at $77 – or alternately at $75.

The charts above in MCD serve a good lesson in trend continuity and EMA support in the context of a lengthy trend in a leading Blue-Chip stock.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Read more here:
McDonalds MCD Hard Fall to Daily Support

Uncategorized

Be Cautious of ETFs Boosted By Japan’s GDP Revision

December 9th, 2010

Japan witnessed its fourth consecutive quarter of economic growth enabling it to retain its position as the world’s second largest economy after beating GDP expectations impacting the iShares MSCI Japan Index (EWJ), the iShares MSCI Japan Small Cap Index Fund (SCP) and the Vanguard Pacific Stock ETF (VPL).

The Japanese economy expanded by 4.5 percent in the third quarter of the year, exceeding analyst expectations by 0.6 percent and eating away at the nation’s massive deflationary gap.  Furthermore, this expansion has led to Japan’s Minister of Economic and Fiscal Policy to peg an estimated annual growth for the year at around 2.6 percent.  

Although Japan has been exceeding growth expectations, it is important to take this outperformance with a grain of salt.  The aforementioned economic growth was primarily driven by increases in private sector inventories which further suggests that now inventories have been replenished, production cuts are likely to prevail.  Another driver behind increased GDP was an increase in domestic consumption driven by deadlines for subsidies for environmentally friendly vehicles and other economy boosting measures, which are expected to expire and have a negative effect on future consumption.  In fact, these trends are already starting to prevail as unemployment rates have started to worsen, industrial output has started to decline, retail spending has started to taper off and exports are slowing down. 

To put further strains on Japan’s economic outlook, corporations are starting to be more cautious in regards to investing and policymakers are hinting at increasing the consumption tax rate to procure money for the nation’s aging population. 

At the end of the day, when it comes to economic growth, Japan faces an uphill battle and is likely to lose its place as the world’s second largest economy sooner rather than later.

  • iShares MSCI Japan Index (EWJ), which allocates nearly 19 percent of its assets to the consumer discretionary sector.
  • iShares MSCI Japan Small Cap Index Fund (SCP), allocates nearly 20.75 percent of its assets to consumer discretionary and is more correlated to the consumer sentiment in Japan than ETFs which track and hold large-cap stocks.
  • Vanguard Pacific Stock ETF (VPL), which allocates more than 60 percent of its assets to Japan.

Disclosure: No Positions

Read more here:
Be Cautious of ETFs Boosted By Japan’s GDP Revision




HERE IS YOUR FOOTER

ETF, Uncategorized

Africa: Open For Business

December 9th, 2010

Markets make opinions, the old saying goes. So it is hard to maintain old views on Africa as a place to avoid in the face of so much evidence to the contrary. A few snapshot images from the past few weeks should help you think differently about the continent.

There has already been a record $54 billion in buyouts in Africa this year – not including Wal-Mart’s initial $4 billion offer for Massmart, an African retailer. There have also been a number of Africa-focused funds gathering money of late.

These investments are not fool’s errands. The people behind them are not stupid. They see something: growth and opportunity.

The IMF recently upped its estimate for economic growth in sub-Saharan Africa to 5% for the year and 5.5% for next year. Africa is riding a boom of trade with resource-hungry China, but also with developing economies throughout Asia and Latin America. Money goes where it can get the best return. So far, African investments have offered higher returns. And prices remain far cheaper than developed markets, for similar assets.

Of course, Africa is an enormous continent of 54 countries – a diverse group, to say the least. It hardly makes sense, really, to talk about Africa as if it were a set of similar countries. It isn’t. But there are pockets and regions and broad similarities of experience.

In any event, the opportunity in this vast area of 900 million people is hard to ignore.

Recently, I attended Grant’s Fall Investment Conference in New York. One of the more interesting presenters was Francis Daniels, co-founder of the Africa Opportunity Fund, who delivered a talk titled Reflections of a Value Investor in Africa.

Afterward, we had lunch together and I got to chat with him a bit more about investing in Africa. Daniels is a soft-spoken, modest Ghanaian who left his home country in 1982 to study in Canada. By that time, he had witnessed six coups. The first was in 1966. “It had the tremendous benefit of giving me an unexpected school holiday,” he said. But by the sixth attempt in 1982, he had a different view. “I was tired of coups and exhausted by Africa’s seemingly perennial coups, corruption and mediocre leaders.”

Over his 15-year career, he’s invested in every region in Africa. His reflections included many super-cheap stocks that later delivered some multiple of his initial investment. For a Graham-and-Dodd investor, Africa was a carnival of riches. Price-to-earnings ratios of 2 or 3 times with 20% growth rates. Yields of 30% on convertible debt. All kinds of hidden treasures – such as free real estate or unrealized portfolio gains – lurked in the folds of African balance sheets. Africa, too, was rich in untapped natural resources that the world craved.

Africa, though, is famous for its resources, and a value investor has to figure out a way to apply these principles to natural resources or miss out on a big piece of the pie. Daniels made them work, and some of his best investments came from mining stocks. (Uramin, for example, was a uranium explorer in Namibia and South Africa. It delivered 1,000% returns in two years.)

Here is one of Daniels’ favorite holdings… The stock is Zimplats, a platinum and palladium producer on the Great Dyke in Zimbabwe. It lists on the Aussie exchange under the ticker ZIM.

Zimplats does not produce refined platinum and palladium. Rather, it makes an intermediate product called matte, which it sells to refiners in South Africa. Impala Platinum of South Africa is the second largest producer of platinum in the world and has offtake agreements with Zimplats. It also owns 87% of the shares.

Daniels has owned Zimplats since 2003 and paid an average price of $2.25. Today, it is $12, but Daniels feels it is still too cheap. The stock trades for a price-to-earnings ratio of 10 times. Its enterprise value is $57 per ounce of reserves, compared to $193 for the industry.

Zimplats is also the lowest-cost producer in the world. Costs are $325 per ounce, versus the industry average of $948 per ounce. Zimplats mines from shallow depths at 50 meters below the surface, whereas South Africans have to go at least twice as deep.

Zimplats mines 350,000 ounces a year and plans to reach a million ounces. Its proved and probable reserves will last 67 years at current production. It has about six centuries of resource – yes, six centuries.

Let me finish with a few of Daniels’ lessons from 15 years of investing in Africa, as I think these are applicable to investors everywhere:

  • “Macro-time is slower than micro-time. It took a few years for the hyperinflationary logic of Zimbabwe’s fiscal and monetary policies to end in actual hyperinflation.” I think we are seeing the same thing happen in the US. While it’s clear where deficits and money printing ultimately lead (i.e., high rates of inflation), the market has been slow to realize it, as shown by a 10-year Treasury rate still smaller than my hat size.
  • “Government paper is riskier than private paper.” This one sounds less surprising than it might have three years ago. But a slew of sovereign debt defaults (i.e., Greece, et al.) shows that, as Daniels says, “Fantastic promises prove to be just that in the long run.”
  • “The best way to preserve real wealth in Zimbabwe was to own the equity securities of companies that earned non-Zimbabwean dollars.” Applied to the US, it would be to own the stocks of companies that earn their bread in stronger currencies.

These are just a few. I think Daniels shows a smart value investor can do very well in Africa. Of course, you could just buy his fund, which as I write trades for a 27% discount to underlying NAV. I also think Daniels’ lessons in Africa are worth thinking about, even if you never invest in Africa.

Regards,

Chris Mayer
for The Daily Reckoning

Africa: Open For Business originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Africa: Open For Business




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Real Estate, Uncategorized

Mexican Oil Goes from Public to Private

December 9th, 2010

We arrived in Charm City late last night, after a lengthy layover in Houston. To say the air here is fresh, or crisp, would be an understatement. It’s colder than a central banker’s heart. Well, that may be a slight exaggeration. A fierce wind lashes off the Inner Harbor. Steam pours from the manholes lining the streets and billows into the night sky. The few brave – or destitute – souls who venture outside are bundled up in their winter woolies. It’s a far cry from the balmy, Pacific Coast weather we’d been enjoying in Mexico of late. Speaking of our southern neighbor, here’s a headline for you, Fellow Reckoner:

“In Major Shift, Mexico Allows Oil Drilling by Outsiders,” says one of the newswires.

What’s this? Has the Mexican government been thumbing through the virtual pages of our “fringy,” “doom and gloom” publication? Earlier this week, as you may recall, we wrote an entire article (“The Gross Mismanagement of Mexico’s Oil Industry”) outlining how needless pressure from Mexico’s bureaucracy has, over the years, inhibited the full development of the nation’s vast oil reserves.

“With heaven and earth conspiring to deliver such a bounty to the Mexican people,” we wrote of the geologically freakish Cantarell Field deposit, “one is tempted, perhaps beyond better judgment, to ask: What could possibly go wrong? Enter Pemex, the nation’s state-owned petroleum company. Again, it seems there is no privilege so vast as to render it beyond the destruction of the ‘people’s’ government.”

Mexico’s crude production, under the “stewardship” of the state-owned Pemex, has traversed a steep, seemingly inexorable decline for the better part of the past decade.

“Despite annual revenues in excess of $75 billion dollars, Pemex is only able to survive today through its immense borrowing,” we wrote. “Pemex pays out over 60% of its revenues in taxes and royalties. Those receipts, in turn, account for around 40% of the federal government’s entire budget. As such, the state-owned dinosaur is now over $40 billion in the hole (so to speak) and, to make matters worse, is facing inexorable production decline in many of its fields, including that giant asteroid baby, Cantarell.”

All this amounts to falling revenue for the Mexican government and, as a side non-benefit, imperiled US energy security. (The US is the Central American nation’s largest customer – declining production there translates to more pressure on the US to “fill the tank” from other, relatively unfriendly nations abroad.)

But that all changed on Tuesday, when Mexico’s supreme court decided to invite private companies – both domestic and foreign – into the marketplace for the first time in 70 years. Juan Jose Suarez Coppel, the CEO of Pemex, said he hopes the liberalization of the sector will help Mexico work toward production of 3 million barrels per day within ten years. There’s plenty of room to go wrong, of course, but this seems like an uncharacteristically rational step in the right direction by the Mexican government. We’ll see where the chips fall in due time.

Alas, where the tide of state strangulation recedes from one shore, it rises to wash away whole villages on another. Back here in the United States of ’merica, we see evidence of government involvement all around us. There are rules and laws against all sorts of things, all, we suppose, designed to help protect us from our infant-minded selves. “No loitering”… “No running”… “No standing on one’s head.”

And nowhere is the feeling of Big Brother more oppressive than in the sphere of economics. It’s a government-sponsored recovery, we are told (though we hear little mention of the government-sponsored recession that preceded it…nor the government-sponsored depression that will likely follow).

For the most part, the media tends to view Obama/Bernanke policy like it’s handed down from Mount Sinai: “Thou shall have thy cake and thou shall eat thy cake,” seems to be the general gist of the story. More tax cuts…and more benefits. More spending…more credit for crooks…more deals and handshakes for deviants and shysters.

As far as we can tell, all this circus activity is doing little to inspire confidence in the markets. Yesterday, last we checked, major indexes were neither up enough to raise an eyebrow nor down enough to raise a smile. Gold, however, had taken a $30 nosedive by lunchtime…enough to remind us not to check the daily charts so…uh…daily. The precious metal, a very natural bet against the world’s very unnatural fiat money, is in a decade-long bull market. A $30 single day move may be sufficient to entice some traders to take profits, but it’s probably not enough to entice most investors to sell. And, with central bankers at the pump from the Potomac to the Thames to the Rhine and beyond, that’s not likely to end any time soon.

Joel Bowman
for The Daily Reckoning

Mexican Oil Goes from Public to Private originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Mexican Oil Goes from Public to Private




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

Worlds Apart: A Firsthand Look at Emerging Market Growth

December 9th, 2010

Yes, we’re back at home, after flying around the world. It was a good trip. No problems. No hassles. Everything went well.

What was the point?

“You know, my friends and relatives in the states still believe that the US is the greatest place in the world,” explained an American in Melbourne, Australia. “They think the rest of the world is full of poor people who can’t wait to emigrate to the US. They need to get out more.”

So we get out. We open our eyes. We look around.

And what do we see?

We see a whole world full of people who are hustling and bustling…schlepping and bussing…each trying to gain an advantage…each looking for a way to get richer, faster.

The motivations all over the world are about the same. People generally want wealth, power and status. And they want to get it in the easiest possible way. But it can mean different things to different people…and they go about it differently too. In the mature economies, they look for subsidies and angles. Tax breaks. Bailouts. Boondoggles. Sinecures.

“We have plenty of corruption here in India, too,” a colleague noted. “But most people know they can’t get much from the government. They have no choice. They have to start a business or get a job.”

Nothing stands still. A few years ago, the Russkies, the Indians and the Chinese were all very helpfully sitting on the sidelines. With their goofy theories and their counterproductive policies, they posed no competition. Americans found it easy to feel superior. Half the world had tied its hands behind its back.

But in the ’70s and ’80s, things began to change. “To get rich is glorious,” said Deng Xiaoping. “Perestroika,” said Gorbachev. And now they’re all at it. Indians, Brazilians, Turks, Indonesians – they all have faster growth rates and much less debt than the developed countries. China and Turkey are both growing about 5 times faster than the US. India, Brazil and a dozen other countries aren’t far behind.

The latest test scores show Chinese math students in Shanghai far ahead of Americans. And the latest reports tell us Chinese trains are setting records – at 300 mph.

Nothing is off limits. No industry is safe. Nobody can expect a free lunch forever.

In India, we rode in a Nano, the car Tata Motors is selling for $2,500. It was a little loud…but surprisingly spacious and comfortable. For getting around town, it seems perfectly adequate. And soon it will be available in the US. How will Detroit compete with these guys on the low end? And on the high end, there’s plenty of competition too – from Japan and Germany.

“But wait…Germany is a mature economy too.”

Well, yes…and no. Germany’s factories and infrastructure were flattened in WWII. It had to rebuild from the bottom up. Its post-war government was completely new. Its currency just came out less than 10 years ago.

Besides that, a large piece of present-day Germany lived under the heel of the Soviets for 45 years. They had a close-hand look at what central planning can do to an economy.

America’s government, meanwhile, has been in business since 1776. Its economy has been the biggest in the world for the last 110 years. It was the only major combatant in WWII to come out the other end with its wartime plant and equipment intact. It has had the world’s richest people and the most gold for many years.

“Nothing fails like success,” is one of our Daily Reckoning dicta. Will it fail now, or later? We don’t know. But readers are urged to get out more…and draw their own conclusions.

Bill Bonner
for The Daily Reckoning

Worlds Apart: A Firsthand Look at Emerging Market Growth originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Worlds Apart: A Firsthand Look at Emerging Market Growth




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Dr. Ron Paul Takes Over Chair of Domestic Monetary Policy, Including Fed Oversight

December 9th, 2010

Today it’s been announced that Congressman Dr. Ron Paul (R-TX) will become Chairman of the Domestic Monetary Policy House Subcommittee in 2011. If ever the US could benefit from a turning point in monetary policy it’s now. This is one of Congress’ most relevant entities for supervising that work, as a component of the overall House Financial Services Committee, the Domestic Monetary Policy and Technology Subcommittee oversees:

  • the Federal Reserve’s efforts to carry on its regular responsibilities, including bank examinations, consumer protection and data collection
  • the testimony of the Chairman of the Board of Governors of the Federal Reserve
  • Emergency Authority, including the Fed’s efforts to withdraw the extraordinary monetary stimulus it provided and reduce its balance sheet
  • the state of US coins and currency, including examining the roles of the Bureau of Engraving and Printing, US Mint, Federal Reserve, and Secret Service
  • audits of the Federal Reserve, or whatever is left of that possibility, based on the final version of the signed Dodd-Frank Act

Perhaps no congressman is more actively — or famously — engaged in the task of changing the current trends in monetary policy than Dr. Ron Paul, author of “End the Fed,” and a studied critic of how the US manages its money supply. He sees monetary reform as an eventual necessity and the dollar as unable to indefinitely operate as the reserve standard for the world.

As of today, it looks like he’s going to get his best chance to date.

This past Tuesday, the House of Representatives’ Republican leadership chose Congressman Spencer Bachus (R-AL) to serve as head of the House Financial Services Committee. Today, Bachus announced his appointments for the 112th Congress’ financial services committee leadership, including Dr. Paul.

It’s expected that Dr. Paul will make increased efforts to examine the Fed’s monetary policy decisions, open up more of the Fed’s interest rates and monetary easing deliberations to congressional scrutiny, and take a closer look at the US role in global economic coordination, especially the sort that takes place through the International Monetary Fund.

In his official statement, Bachus says:

“This is the leadership team that crafted the first comprehensive financial reform bill to put an end to the bailouts, wind down the taxpayer funding of Fannie Mae and Freddie Mac, and enforce a strong audit of the Federal Reserve.”

For better or worse, we’ll keep you posted on where Bachus, Paul, and the rest of the new Financial Services Committee leadership takes it from here.

Best,

Rocky Vega,
The Daily Reckoning

Dr. Ron Paul Takes Over Chair of Domestic Monetary Policy, Including Fed Oversight originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Dr. Ron Paul Takes Over Chair of Domestic Monetary Policy, Including Fed Oversight




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

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