Scott's finally broke out of this triangle and channel to the downside. If I am measuring correctly we can get into the $45-$47 range.
Slope of Hope Blog Posts
Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.
Dollar Fail? (by BKudla)
This is my trigger to add to my hard asset positions, I have set a series of buy stops.
Risk On/Risk Off (by BKudla)
People ask me all the time if the U.S. is in such bad shape and things get worse, why will the dollar and gold do well. I then whip out this chart and explain to them that as things get bad people need to sell things that are electronically invented and / or are leveraged and buy something that has less debt or leverage associated with it, or in the case of gold no debt associated with it.
To illustrate how much debt worldwide is out there against real capital, look at the following chart.
The annotations are mine from government websites. There is approximately $5 trillion in cash and gold supporting $290 Trillion in assets. That is some nasty leverage. The world governments are trying to add $2 trillion in capital to the foundation. This is grossly inadequate. The world's asset base simply declines by 3% and we are insolvent again.
As anyone who owns a business or truly invests in capital assets, you value these assets on the discounted income they generate, and as government spending takes over private spending to increase this capital base, it is inefficient and slows velocity that can generate income, and increasing taxation does the same. So bottom line, the income supporting these assets are suspect and after a next flirt with high inflation we collapse into a debt destruction spiral. Happy New Year.
Some Musings (by BKudla)
As 2011 unfolds before us, I am thinking hard about my portfolio and how to position myself with the upcoming volatility. To me, even if the FED is actively buying and adding liquidity to the market, headwinds are already blowing strongly.
China is now playing defense in trying to control a FED induced inflation, which will slow their economy down more than anyone is will to publicly comment. Their banks are loaded with non performing assets, and their companies are operating on near zero margins. It will be hard to justify the China is the engine theme.
Europe will have member state defaults, IMNSHO, Ireland will cry uncle and default, Sein Fein is likely to take control of the government in March, and they already are declaring this agreement null and void. Once this occurs, the British banks are toast, and France and Germany take some sweet haircuts. Best case scenario is a radical restructure of the current deal to Ireland's favor. But Ireland is only a catalyst, Spain blows the barn down. Either way the Euro weakens in 2011.
The BRIC nations, we already spoke about China, Brazil and Russia are commodity countries that have different futures. Russia will suffer some serious food shortages next year, their wheat belt is already drought stressed, and with this very cold winter, expect the planting season to be late. This brings frost into play and another failed crop will cause grain prices to spike, devastating Russia, and seriously impacting the ROW. Brazil is dependent on a healthy China, as well as Australia. Although I do not follow India that closely, it appears they are having some inflation issues.
Then there is the good ol USA, I already recapped in an earlier post regarding our priced for perfection market, and extreme bullishness, but we have some serious skeletons coming out, and a political environment that is hostile to the devalue and stimulate environment everyone blindly bought into for the past 20 months.
The mortgage crisis will come to a head this year, rising interest rates and judicial proceedings will see to that, this overwhelms any interest income spread the banks enjoy. California, Illinois, and New York will blow up this year, here in CA the budget deficit is 25% of the entire budget, it takes 2/3 vote to increase taxes, which won't happen, and congress will block any attempt by Obama to subsidize the states like the past two years. This is a train wreck coming. The House is dominated by the Republican party with a voter mandate to shut down the spending, and this will dry up any expected uptick from the federal government. The FED may try for QE 3,4, whatever, but there is a vote pending to raise the debt ceiling, I believe the Repubs will use that leverage to take power away from the FED, and most definitely Obama.
Does this sound like economic recovery to you?
This post is getting long, I will next explain my trading plan for 2011, based on this thesis.
Noble, Not So Much (by BKudla)
I like using the 13 weekly EMA as a bull/bear line, and Noble broke that line and also has weakening relative strength. A head and shoulder is also forming on the daily. My trade plan is as follows; I am in with a 36/40 call credit spread for $.40, I am out if NE breaks $35. If/when the neckline breaks I will place a $30/25 Feb debit put spread, close at the measured move.
