EconMatters

Should I race across state lines with a bag of weed in the car? With the passage of two states Colorado and Washington in the last election cycle to allow for recreational uses of marijuana without a prescription or medical excuse which is in violation of Federal Law. With states like California and Montana voting for medical marijuana but fearing a fight with federal law officials even with this baby step it seems that laws are becoming even more arbitrary by the day. President Obama has come out and said he isn`t going to go after Colorado and Washington for a violation of federal law, even after his administration only two years ago was strong arming and threatening California and Montana for a “lesser” violation of federal law. It does seem that the will of the people if we go by media coverage, mainstream pot portrayal/acceptance in movies and music, simple demand for the product, etc. that a significant amount of US citizens accept that recreationally using the drug is ethically, morally and legally right. In short, public opinion has turned in this country, not that you can get a majority on any issue in this country, but that more
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  Where are all the Gold Bugs? The decline in GDP saw gold and silver spike yesterday with the thought that the fed will still be around a little while longer. But before that report traders have been selling into any Gold & Silver rally with the thought that the economy is getting better, risk appetite is gaining, funds are unwinding the safe haven trades, and ultimately interest rates are going to start rising. Gold Selling into Rallies the new sport? This is the reason that prior to yesterday Gold and Silver have not been participating in the Risk On rallies in markets. Sure they spike a little at the beginning of the year, or week, etc. but soon are sold into rather heavily. Now granted gold and silver haven`t been putting in new lows, but are sort of just stuck in trading ranges. However, it is to be noted that they are underperforming other asset classes right now. All of which brings me to the question of whether Gold should be sold into on any spike upwards? Have we seen the Near-Term Top in Gold? Have we seen the near-term top for Gold and Silver markets for two, three,
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Gas Prices Pegged to Risk On Trade As long as gas prices are pegged to the market rally in equities and the currencies in the Risk On Trade then this rally is nearing its end. Gas prices are up 35 cents and climbing, oil is up $13 and climbing and because of congress consumers are being taxed more in 2013, and as a result have less take home pay to apply towards discretionary spending. That combination makes for a healthy economy? Decoupling Needed for Ultimate Recovery Until gasoline and oil finally decouple from the Risk On Trade we are going to continually have this stop and start economy every time the market goes up on the correlated asset trade. At this pace I give the rally two more weeks at most, unless the aforementioned assets decouple. Gold and silver have decoupled, but oil is moving right up with the euro and yen funding currency crosses. Since When is a Higher Euro Good for a European Recovery Not only is the Risk On trade going to kill the market rally in the US as consumers pull back as portrayed by the slide in consumer sentiment yesterday. But a stronger Euro is
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Just four months ago… Markets have had a good run from the third quarter earning`s selloff, the inevitable Santa Claus rally, and the first quarter new money being put to work. But all this talk about some Super Cycle turn in the economy is putting the proverbial cart ahead of the horse. How quickly things can turn. The economy was reacting so poorly at Jackson Hole that Ben Bernanke needed to implement another round of stimulus in QE3, this stimulus measure failed to boost asset prices substantially, so Ben Bernanke tweaked QE3 to try and juice up markets with additional treasury injections. The economy is so bad in Japan that they needed to replace another prime minister, employ additional stimulus measures, and weaken their currency. Auto sales are so bad in Europe that major downsizing has occurred. Britain is currently in a recession, and China has been on a two year downtrend in growth. Just to provide a little historical context to put this recent market rally in perspective. It is a good idea to separate results oriented thinking, i.e., higher markets from the actual global economic conditions. Same ole pattern so far Most of the earnings results have been
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License to steal Every single day the oil market is manipulated, it is easy to see, right out in the open, and nobody does anything about it. It literally is like having a license to rob banks right in front of everybody, including the armed security guards. Large Fake Order Strategy Here is a technique that is used by large players to manipulate price in either direction, and it needs to be banned, it is outright cheating. So a trading Dom is an order entry price ladder which shows a collection of bids on one side, a typical default setting would be 10 levels deep. On the other side of the price ladder is 10 levels of asks, going from nearest to farthest away from the current, or last traded price in oil. For example, if oil is trading at $96.00, there will be asks going from 96.01, 96.02…96.10 and conversely there will be bids going from 95.99, 95.98…95.90. The cheating technique is as follows: Let`s say oil is trading at $96.00, and the bids and asks size on both sides of the ladder are relatively all the same size, let`s say 30 contracts. Who are the Culprits? Well, large
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Pullbacks Are Nice   Let`s start with the Yen Carry trade, where do you think the juice came from for that S&P ride above 1500? Gee, somebody was sure waiting for a pullback to get in on that trade. Frankly, it was a rather tepid reaction to the major disappointment by the BOJ, but traders really want to move assets up, and the Yen is their best friend.     Ergo, the next level to watch is 95 in the cross, once the Yen breaks above 91 with strength. We haven`t had a legitimate selloff yet, so let us see how this cross reacts at the first sign of selling in the market. A lot of stops could get hit on the unwind of this trade on any major market sell-off of 4 days in length with a couple of 100 point Dow down days thrown in the mix.     Further Reading - Gold Market Dip Buying Strategy   Volatility Bounced Off The Bottom   This brings me to Vol, which was bought up prior to the European close mid-day selloff, watch for Thursdays, after a nice morning ramp up in assets, always be wary of the 10:30 CST, market
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Apple Inc. (NASDAQ:AAPL), Welcome to the World of “Commoditized Products” The luster is finally falling off of Apple Inc. (NASDAQ:AAPL), and in the end they were just a hardware provider, who provided products which will easily be commoditized as we noted previously. Every spike in Apple will be heavily shorted into as margins compress for the next 4 years plus, i.e., eternity. Research In Motion Limited (NASDAQ:RIMM (TSE:RIM) says welcome to my world Apple Inc. (NASDAQ:AAPL), your hell is just beginning. If Apple Inc. (NASDAQ:AAPL) couldn’t blow out numbers with their signature product, in their holiday quarter with an imploding stock price, forget about it, all downhill from here for one of the most overvalued stocks of all time. Further Reading - Apple Inc. (NASDAQ:AAPL) Price Target: $50 Stock by 2016   Tech Graveyard – Where Supposed Growth Stocks Go To Die   Now this sets the stage for a couple of other stocks that are about to face the music as the earning`s season picks up speed. It was a nice strategy to buy Hewlett-Packard Company (NYSE:HPQ) after the tax selling season finished, and push it up with all the other dog stocks of 2012 in Dell Inc. (NASDAQ:DELL), Research In Motion Limited (NASDAQ:RIMM (TSE:RIM) and
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Energy and environment conservation has been high on every nation’s agenda probably even before the oil crisis in the 1970s.  Green cars such as hybrids and electric cars have been gaining popularity as well as auto market share in the U.S. driven in part by high oil and fuel prices, as well as government policies, and subsidies in some cases, pushing for higher fuel efficiency. Most people think “eco-driving” or even carpooling is a win-win– saving gas money and the environment at the same time.  But it looks like what may be good for the environment, is actually bad news for the government. You see, for each gallon of gasoline or diesel we gas up in our cars, there’s a portion of tax that goes to the state government to fund the building and maintenance of roads and bridges.  So unfortunately, more fuel efficiency and less driving even by carpooling means less tax revenue for the government, and the green car is also to blame. For example, in Vermont, revenue collection of the state’s transportation fund has been shy of their target for seven straight years.  According to AP, 25% of Vermont’s expected $232-million transportation fund in the current fiscal year is
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True Wealth Pie Decreasing The Bank of Japan came out with their long awaited 2% inflation target, and currency devaluation scheme, but it is doomed to fail. It will fail like all these government and central planning currency devaluation schemes because the one point that nobody gets right now is that the entire world is in the middle of a twenty-five year Super-deflationary cycle because there is a depreciating pile of total wealth in the world. In short everybody is broke! Mature Governments all in Debt Most governments are heavily in debt, they are ultimately going to be forced to cut back spending through austerity programs. Most governments are going to have to raise taxes for the next 25 years, taking more money from both businesses and citizens. This all results in less disposable income to purchase products, and much lower margins for all companies for the next 25 years as competitive pressures fight over a smaller overall pie of disposable income. 50 Years of Leveraging Cycle Most analysts expect a Super Inflationary Cycle due to the massive amount of currency devaluation and money printing schemes around the world. But ultimately, the reason everyone is trying to devalue their currencies
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China Q4 GDP China`s economy grew 7.9% for the fourth quarter of 2012, signaling to some that China might be rebounding from a two-year downtrend in economic growth. When it comes to Chinese data though, transparency issues always rear their ugly head. As a result, many analysts look to Electricity usage to confirm the economic numbers. Many times the electricity numbers are at odds with the stronger economic numbers coming out of China, and analysts believe that during this downturn, the actual growth numbers were much lower than those published officially. They pointed to lower electricity numbers that have dropped off substantially more than the economic drop-off on a percentage basis. The conclusion is that China is inflating the real growth numbers to paint a more flattering picture of their economy. Is this the right Conclusion? When the latest economic numbers came out, analyst compared these numbers with the electricity numbers, and they came to the conclusion that the electricity numbers confirmed an uptick in economic growth in China. So their conclusion is that the Chinese GDP numbers are correct. Productive Growth vs. Artificial Growth I have my doubts regarding the Chinese growth numbers. But I even have a bigger
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The CME raising margins for Silver Futures to such a degree that relative to market price, futures multiplier, and physical demand by consumers is just too high has basically killed the silver market. Throw in the fact that many brokerages have even higher margins than the exchange margins, and outside of a fed announcement, the silver market has all but dried up, when compared to the much more active physical market for silver. The Silver contract which closed Friday at $31.93 an ounce has an initial margin of $16,940 with an overnight margin of $11,000 at a typical brokerage. Now I know this market went through a very volatile trading phase, and with all the turmoil regarding Europe and central bank decisions around the world, it was probably a good idea to raise margins beyond normal percent driven formulaic metrics, until things settled down given the number and magnitude of the trading losses experienced at many brokerages. As in, when brokerages institute higher margins than exchanges this tells you how many accounts were blown out with the crazy gyrations in the silver market when it was having 20% swings in a week.   I know margins have come down from
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