The Richest Members of Congress
Rep. Michael McCaul, R-Tex., is the wealthiest member of Congress, with a net worth of at least $290 million in 2011. McCaul's wealth stems from a variety of family trusts and connection -- for instance, his father-in-law is Lowry Mays, the founder of the radio broadcasting company Clear Channel Communications.
Sen. John Kerry, D-Ma.
The senator from Massachusetts and one-time Democratic presidential nominee had a net worth of $198.8 million in 2011, much of that coming from wife Theresa Heinz Kerry's ties to the Heinz Ketchup fortune. Kerry topped The Hill's list of wealthiest lawmakers in 2009 and 2010, before being surpassed by McCaul last year. Gold Investments Market Update - No Gold Rush or Gold Fever Despite the International Financial System being Close to Collapse
Gold has rallied strongly again this morning and is up 1.5% at $990/oz after consolidating around the $975/oz mark yesterday. Stock markets are under severe pressure again this morning after yesterday’s 7 year low close for the Dow Jones.
There is a risk here of a panic sell off in stock markets and the next leg down in the stock bear market looks imminent as the ills of the global financial system virulently infect the global economy. While gold has become overbought in the short term, its medium and long term fundamentals are as sound as ever.
Governments and central banks, in their desperate attempts to avert deflation, are debasing their currencies and risk causing an international monetary crisis where investors and savers flee paper assets and currencies into hard, tangible, finite assets that cannot be printed exponentially.
Much mainstream media coverage of gold remains uninformed and lukewarm to negative despite the appalling financial and economic conditions challenging us. This is a sign that gold remains in the early to middle stages of its bull market. Talk of gold fever or a gold rush in the gold market is very misguided as only a tiny fraction of retail investors have any allocation to gold whatsoever – let alone being overweight gold.
There are no accurate statistics but I would confidently estimate that less than 2% of retail investors have any allocation to gold whatsoever.
The man in the street barely knows what the price of gold is in dollars, let alone in sterling or euros. The majority of retail investors (and indeed financial advisors) know little or nothing about why one should invest in gold, nor indeed how one would invest in gold.
Table Above Shows the Slow but Steady Rise of Gold in Recent Years
Gold is featured in the non specialist financial media once in a blue moon (every few months at best) and when it is covered it is nearly always covered in a negative or at least lukewarm fashion.
Factually incorrect statements such as most analysts warn that gold could be overvalued and there could be a painful correction on the way are commonplace. The fact is that the majority of analysts are bullish on gold as can be seen in the Reuters Precious Metals Poll and the Bloomberg Gold Survey (both of which we take part in). Most analysts and experts in the precious metal markets remain positive towards gold due to the unprecedented global financial and economic meltdown we are now suffering.
Many of the analysts who are negative are in fact product sellers, stockbrokers and other vested interests who have always been negative on gold and will likely always be so as they simply do not understand and have not bothered to inform themselves about the market.
We will have a gold bubble and a gold mania in the coming years. There is no fever like gold fever. However, we are a long way from there yet and gold will have to reach its inflation adjusted 1980 high of $2,400/oz in 1980 before it can be classed as overvalued. It is currently less than half the value that it was in 1980.
There cannot be a bubble in an asset class unless it rises to all time inflation adjusted highs and often times asset bubbles result in prices of multiples of their previous record highs.
In January 1980, just before the Federal Reserve avoided an inflationary catastrophe, the gold price peaked at $875. That is $2,430 in today’s dollars. But the pools of speculative capital are much larger now than in 1980. A true gold bubble could well leave this benchmark far behind.
And if the dollar collapses (‘Former Bank of England official expects dollar collapse’ http://www.telegraph.co.uk/finance/4125947/Willem-Buiter-warns-of-massive-dollar-collapse.htm) as some fear and the US suffers virulent stagflation or hyperinflation then we will rise way above the 1980 inflation adjusted high.
Gold rose by more than 2,400% (from $35 to $850 or up X 24 times) in the 1970s . Should a similar bubble form now gold would have to rise from a low of $250 in 2000 to over $6,000/oz.
The Nasdaq rose some 1600% from some 300 in 1990 to over 5000 in 2000 ( up X 16 times). Should a similar bubble form now, gold would have to rise from a low of $250 in 2000 to over $4,000/oz.
Even the Dow Jones went from 1900 in late 1987 (after crash) to over 14,000 (up X 7 times). Should a similar bubble form now, gold would have to rise from a low of $250 in 2000 to over $1,750/oz.
To take an even longer term and classic, archetypal example of a bubble, we only need to look to the South Sea Bubble which saw a nearly 10 fold increase in less than a year (a real proper mania) .
Should a similar bubble form now, gold would have to rise from a low of $250 in 2000 to over $2,500/oz (which coincidentally is gold’s inflation adjusted high of 28 years ago).
Gold has no fever, rush or mania yet with little or no retail participation and most of the media covering gold semi annually. More importantly returns have been slow and steady as seen in the performance table above.
Always good to keep a historical perspective especially in these unprecedented and very challenging financial and economic times.
Trading Recommendations For Thursday
Financials: Bonds are currently 15 higher at 117'24, the 10 Yr. Notes 6 higher, the 5 Yr. Notes 2 higher and the 2 Yr. Notes fractionally higher. Dec. Eurodollars are 1 lower at 99.265. We remain short Dec. Eurodollars. I am still looking at the Bonds as a trading market between the 116'15 area and the 118'20 area preferring the long side of the market.
Grains: Yesterday Beans were 3 cents higher, Corn 3 lower and Wheat 12 lower. Over night Beans were 8 cents higher, Corn 8 higher and Wheat 4 higher. We were stopped out of recent long positions in Dec. Wheat when the 554'0 level was violated. Yesterday we were able to go long Dec. Corn below the 320'0 (the low was 314'6). If you went long either take the short term profit or use a protective sell stop at 313'0. If the market trades above 335'0, either take profits or raise your sell stop to the 322'0 level.
Cattle: Yesterday Live Cattle closed 37-132 lower with the Aug. contract closing 100 lower at 85.02. The Oct. contract closed 132 lower at 89.80. If you went long on yesterday's break use a sell stop 175 points below your entry level.
Silver: Sept. Silver is currently about unchanged at 13.70. I continue to remain on the sidelines. A close above 13.80 will generate a buy signal and I will be encouraged to be a buyer on breaks. Over night the high was 13.86 but the market has yet to be able to maintain these prices, which is why I need to see the market close above 13.80.
S&P's: Sept. S&P's are currently 3.00 higher at 953.00. I still prefer the short side of this market with a protective buy stop at 962.00. If the market should trade below the 933.00 level either take profits or lower your buy stop to 947.00. Near term support is currently 924.00.
Curre3ncies: As of this writing the Sept. Euro is 16 lower at 1.4212, the Swiss 63 lower, the Yen 101 lower at 1.0590 and the Pound 7 higher at 1.6469. I continue to recommend being long out of the money puts and/or put spreads in the Yen. I also want to be a short seller in the Pound above 1.6600. The Sept. Dollar Index is 21 higher at 79.070. For a little perspective, the year to date low is 78.375 and last years low was 70.805. I suspect the Dollar will find some near term support in the 78.00 area.
Sen. Mark Warner, D-Va.
The Democratic senator from Virginia, who was an early investor in Nextel, saw his wealth increase by $9 million last year to $85.9 million. Bank worries set to trip Wall Street at open
U.S. stocks headed for a drop at Friday's opening that would extend a rout which has pulled the Dow Jones industrials to a fresh bear-market low, as worries about the fate of major banks escalated.
Fears that the U.S. government's bank rescue plan might involve nationalization and that the recession is worsening had investors scurrying toward the relative safety of U.S. government bonds as stocks plummeted in Europe and Asia.
The Dow industrials <.DJI> slid to their lowest close in more than six years on Thursday after hitting a fresh intraday bear-market low.
That breach has investors fretting about the likelihood that the benchmark S&P 500 <.SPX> could also break through its November lows as the gloom persists and retest levels not seen since 1997.
There's a lack of confidence in the government to get us out of this and that has people sitting on their hands and not willing to buy, said Matt McCall, president of Penn Financial Group in Ridgewood, New Jersey. There's that fear that we nationalize banks and this market gets killed.
Before the bell shares of Bank of America
News that New York Attorney General Andrew Cuomo has subpoenaed Bank of America Chairman and Chief Executive Kenneth Lewis over whether the bank withheld information from investors in its purchase of Merrill Lynch may also hurt sentiment.
The Wall Street Journal reported that Lewis was subpoenaed last week.
S&P 500 futures fell 17 points, and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures dropped 155 points, and Nasdaq 100 futures declined 20.50 points.
Lowe's Companies
Shares of the second-largest home improvement retailer fell 4.3 percent to $16.25 in premarket trading after the results.
After several near misses, the Dow Jones industrial average <.DJI> this week broke through the low it set in November, taking losses since the record closing high of October 2007 to 46.8 percent.
The backdrop for the latest damage in the market is the failure last week by U.S. Treasury Secretary Timothy Geithner to restore confidence in the financial system when he unveiled a financial sector rescue plan that fueled uncertainty about how banks would be relieved of toxic assets on their books.
There are also concerns that the $787 billion economic stimulus signed into law by U.S. President Barack Obama this week might not blunt the impact of the recession soon enough.
Year-to-date, the S&P 500 is down more than 13 percent, while the Dow has lost about 15 percent.
(Editing by James Dalgleish)
Sen. Richard Blumenthal, D-Conn.
The former Connecticut state attorney general saw his net worth rise to almost $78 million in 2011. FX Thoughts for the Day
USD-CHF @ 1.1837/42...Surprising rise
R: 1.1885-90 / 1.1927 / 1.1955
S: 1.1840-30 / 1.1790-80
Contrary to our expectation, Dollar-Swiss has risen past 1.1850, breaking out of the 1.1550-1830 rising channel that it has been trading in for the past several days. While it now stays above 1.1840-30, there could be chances of follow-through Stop Loss buying, which could take the market up towards 1.1927, the projected Max High for the Day. Before that, however, there could be some Resistance at 1.1890 also.
Failure to move up from current levels, coupled with a break below 1.1830-20 may suggest that the intra-day rise to 1.1885 was a false break.
Whatever it be, our Short at 1.1815 has been stopped out at 1.1855 and we are staying out for today.
Cable GBP-USD @ 1.4307/10...Erratic sideways trade
R: 1.4419 / 1.4460
S: 1.4267 / 1.4150 / 1.4090
Up yesterday to a high of 1.4445 (but not high enough to give up profit on our Long), down today to a low of 1.4152 and then back up just now. Looks like the Pound is intent on moving up and down erratically between 1.4090 and 1.4460 for the next few days.
It is to be seen whether the Resistance at 1.4500 on the Weekly Candles holds or not. Take a look at: http://www.kshitij.com/graphgallery/gbpcandle.shtml#candle
Aussie AUD-USD @ 0.6395/6400...Indecisive, breakout due next week
R: 0.6434 / 0.6490-6520
S: 0.6356 / 0.6305
The Aussie had risen to 0.6525 yesterday, but fell from there to an intra-day low near 0.6356 today. There is good Support at 0.6305, as can be seen on the Daily Candles on the following page:
http://www.kshitij.com/graphgallery/audcandle.shtml#candle
At the same time, there is Resistance near 0.65-66 on the Daily Line chart, as can be seen on the following page:
http://www.kshitij.com/graphgallery/audma.shtml#ma
As such, the market can be ranged and indecisive between 0.63-66 for some time. That said, a breakout is nearing, either up towards 0.67-68 or down towards 0.61 in the coming week.
Kshitij Consultancy Service
http://www.fxthoughts.com
Legal disclaimer and risk disclosure
These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.
Yen and Swissy Losing Safe Haven Status; Canada CPI Softer
Canada inflation data softer than expected. UK retail sales much better. Swissy and Yen losing safe haven appeal. Euro showing inside day price action. Canadian bank on bid in Cable. Looking to buy Usd/Cad.
MORNING SLICES
Fundys - Canada CPI data has come in softer than expected with a -0.3% m/m/+1.1 y/y print after forecasts were calling for -0.2% m/m/+1.2% y/y reading. This should further confirm BoC interest rate policy and the likelihood for additional rate cuts ahead. The most interesting development this week from a price action standpoint has been the notable depreciation in Swissy and Yen, despite the ongoing global macro deterioration and elevated risk aversion. The DJIA has posted fresh trend lows to confirm that we are still in a very bearish market, and the USD continues to benefit from the unstable market environment. However, any flight to safety buying in Swissy or Yen has been compromised of late on the back of an undeniable deterioration within the respective local economies. Data out of Japan this week was miserable, while talk of fears within the Swiss banking system overnight have sent Usd/Chf to new multi-day highs and Eur/Chf impressively higher as well. Again, the market environment and global outlook has not changed and continues to get worse. It now seems as though there is only one currency emerging as the currency of choice, and that is the USD. On the data front, the key release overnight was UK retail sales which came in much better than expected at +0.7% m/m/+3.6% y/y after analysts had been looking for a -0.1% m/m/+2.1% y/y print. In the Eurozone, PMI came in weaker, while French CPI was as expected. Germany's Upper House has finally approved the latest Euro 50B stimulus package. Trichet has been on the wires denying that Ireland is the weakest link in the Eurozone, while also proclaiming his strong opposition to protectionism. Central European currencies continue to take a hit and the latest World Bank forecasts have not helped saying that the CEEU states were subject to high uncertainty. In Austrailia, S&P has downgraded the State of Queensland's ratings from AAA stable to AA+. This has weighed on Aussie, particularly after earlier comments from RBA Battelino who promised there were no concerns about Australia's credit rating. Gold continues to track higher eyeing a move back above $1000 amidst the global turmoil. Looking ahead, key event risk in the North American session comes in the form of US CPI (-0.1% y/y expected) due at 13:30GMT.
Quant -
Techs - EUR/USD showing some bearish inside day price action thus far, with the market unable to build on the previous day's positve momentum. Key levels to watch over the coming session come in by 1.2760 and 1.2515. A break back above 1.2760 will open the door to further corrective action, while back below 1.2515 confirms bearish continuation and exposes 1.2330 (28Oct low) trend lows. USD/JPY price action remains constructive and the pair looks set for a test of the next critical resistance point at 94.60, the 2009 high and neckline of a major double bottom formation. Setbacks should now be propped ahead of 93.30 with only a break back below the latter to delay the recovery structure. GBP/USD continues to consolidate following the latest drop out from the bear channel top at 1.4990 (9Feb high). A break below 1.4095 (18Feb low) will now be required to open the next drop and accelerate declines. The 50-Day SMA by 1.4570 should continue to cap rallies, while 1.4450 is the first level of resistance. USD/CHF has been slowly grinding higher, with the market once again extending gains on Friday just shy of 1.1900 ahead of the latest minor setbacks. Dips are now seen supported by 1.1700 with a break above 1.1900 today to open a move towards psychological barriers at 1.2000, which guard against the 1.2300, 2008 trend highs.
Flows - US investment and prime names on the bid in Usd/Jpy; lots of talk of option unwinds also impacting price action; major stops above 94.60. US investment house on the offer in Cable while Canadian/German banks and Asian sovereign on the bid.
Trade of the Day - USD/CAD: We have seen an ongoing contraction in volatility over the past several months to the point where we have finally reached the apex of a very prominent triangle that has defined trade since late October. Falling triangle resistance comes in by Tuesday's 1.2675 highs and we will be looking for a daily close above the latter to confirm a breakout which will ultimately trigger a fresh upside extension exposing a direct retest of the 1.3020 October 28 trend highs. Ultimately, the upside break should project gains back towards 1.4005 (2004 Highs) over the coming months (measured move objective based off of widest point of triangle). In the interim, the market has now taken out Thursday's high in the overnight session to trade to 1.2630 ahead of the latest minor retreat. We will use 1.2635 (just over today's high) as an entry point for a long trade in anticipation of this triangle break. Strategy: BUY@ 1.2635 FOR A 1.3020 OBJECTIVE, STOP @1.2535.
Fundamental Catalyst - Yesterday's close in the DJIA below the November 20 bear market low now officially confirms that the intense bear market remains in force. A well known economist and Dow Theorist cites in his daily piece that most major bear markets end with stocks at great values or as some Dow Theorists put it, below known values. This has meant in the past that price/earnings ratios for the Dow and the S&P have fallen to single digit numbers. It has also meant that dividend yields have moved into to the 5-6% zone. He goes on……according to the latest Barron's, the P/E ratio for the Dow is now 18.62, 17.90 for the S&P. The dividend rate for the Dow is now 3.98%, for the S&P it is 2.78%. These are hardly the kind of figures I'd expect at a great bear market low.
This paints an extremely gloomy picture going forward and as things have been correlating, should once again translate into a flight to safety in the form of the USD. It would stand to reason that the bearish consolidation in the stock market over the past few months has coincides with the bullish consolidation in Usd/Cad. Therefore if equities are on the verge of another down-leg after yesterday's new low, this could prove to be a useful leading indicator for price direction in the currency pair.
Disclaimer
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