Nico Omer

“We’ve taken the market to areas that used to be considered extreme.  The S&P is selling at a 25% premium to its 200-week moving average.  That is very rarified air.  You can look at the number of stocks that have reached new 52-week highs, they are at a 35-year high going back into the 1980s.  So you see things that ordinarily people would say, ‘The air is far too rarified here.’  Yet because of the concept that ‘I must buy the dip,’ they really don’t get a chance to dip.”

– Art Cashin, Director of Floor Operations at UBS

Kita sudah berada di paruh kedua bulan Mei dan sekaligus paruh kedua kuartal April-Juni 2013 menjelang liburan musim panas. Bursa masih terus melonjak bahkan sebagian besar sudah mencapai target kenaikan yang seharusnya untuk akhir tahun.

Indeks Dow Jones, S&P 500, saham-saham kecil-menengah, transportasi dan lainnya beramai-ramai berlomba menembus rekor tertingginya. Atau dengan kata lain, sentimen bullish masih dominan di bursa.

Namun kenaikan ini merupakan kondisi melt-up market – dimana para investor melakukan aksi beli karena tidak ingin ketinggalan dalam kenaikan harga – sementara di sisi lain yang melakukan tekanan jual terpaksa melakukan short-covering (short squeeze), yang turut menjadi faktor pendorong harga naik lebih tinggi lagi.

Memang sebaiknya tidak melawan model bursa seperti ini, dan aksi beli nampaknya merupakan satu hal yang ada di benak para investor saat ini karena kenaikan belakangan ini dan sehingga akan memicu kelanjutan kenaikan yang lebih tinggi dari yang diduga.

Pertanyaannya adalah bagaimana kita memanfaatkan atau bertransaksi pada bursa yang sedang diliputi euforia? John C. Burford, editor dari MoneyWeek Trader, mencoba menjawabnya dalam sejumlah paragraf berikut:

“Today I will cover the US equity markets via the S&P 500 index, which has been making new all-time highs of late.
Euphoria is rampant in the stock market – there is no other word for it. Sentiment readings are almost off-the-scale bullish. Here is just one:

Chart: elliottwave.com

The Daily Sentiment Index is a poll of futures traders, and since the start of the year record highs have been continually made.

But note that back at the November low, only 8% of the market was bullish! Now, there are only 8% bears. That is extraordinary.

So, in the space of six months, traders have swung 180 degrees to the bull camp. You may ask… what causes a herd of traders to switch allegiance so suddenly?

A great question! And one that many have answers for – although most are plain wrong! My view is that traders follow the herd, albeit mostly unconsciously. Where the herd is heading, that’s where most follow. Waves of sentiment/mood sweep humanity. When people become more positive, they tend to buy stocks, and vice versa.

And when hedge fund managers see others buying, they are forced to follow suit, despite any reservations they have. Otherwise, they will be accused of not matching or beating their competitors. This fear is the motivation behind herding. Also, the US Fed has been vigorous in their support for the market, of course.

But there is another powerful factor at play in the current market – Tina.

There is no alternative – that is the prime justification for buying stocks in 2013. Let’s look at a few of those alternatives:

Bond yields are puny – even junk bonds are making new all-time highs, despite the risk – that is why they are called junk. Even sovereign bonds of such problem nations as Italy, Greece and Spain are being pushed up, supposedly from the waves of investment from Japan.

Gold does not have the allure it once did, and commodities are well off their highs and appear unattractive.

And once the darling of investors, emerging markets have declined off their highs.

So, US stock markets – and junk bonds, which act very much like equities – are almost the only major area which attracts investors. And since recent company earnings have been good, that has provided the justification for joining the herd.

But Tina is not an investment strategy – it is a frame of mind. If equities are the lesser of several evils, then they are still evil! And frames of mind can change overnight (see above chart).

One other point – some are calling this the start of a massive bull market with some forecasts calling for 25,000 in the Dow.

But one glance at the above chart should convince that we are much closer to a top than a bottom. All bottoms have started from low bullish readings, and all tops have been made on high bullishness. In fact, this has to be the case.

The power to create a bull market has to come first from the majority of traders/investors that have not yet bought into the market, then from the majority who are short, who need to cover as the market rallies.

This means that I am still looking for a top – a search which has been in vain, I admit. Who said that markets can remain irrational for longer than you can remain solvent? But maybe he hadn’t heard of stop losses…”

Saat kebanyakan orang mengejar kenaikan, saya justru lebih memilih untuk mencari aman. Dan inilah yang menjadi tema utama tulisan saya pekan ini, dengan berlandaskan teori dari sebuah organisasi yang memiliki dedikasi mempelajari efek psikologi massa pada peristiwa-peristiwa dunia.

Bagi Anda yang belum tahu Elliott Wave Theory (EWT), yang memiliki dasar dari gagasan bahwa perubahan psikologi massa merupakan pendorong dominan perubahan di pasar – lebih dominan daripada laporan pendapatan perusahaan, margin atau hal-hal fundamental lainnya.

Perubahan-perubahan psikologis biasanya terjadi dalam pola terukur. Jadi, dengan mempelajari psikologi massa tersebut, maka dapat memprediksi kemungkinan arah gerak pasar berikutnya.

Mereka yang mengetahui EWT justru akan lebih tenang di saat euforia di pasar semakin tinggi dan orang-orang berpandangan bullish secara luas. Mengapa demikian? Karena mereka mengetahui bahwa orang-orang yang berpotensi melakukan investasi ternyata sudah melakukannya, artinya sudah tidak ada lagi potensi pembeli yang tersisa – yang ada justru potensi penjual yang sedang mengincar puncak kenaikan.

Pada laporan State of the Global Markets – Edisi untuk 2013, dari Elliott Wave International milik Robert Prechter’s, ada sebuah artikel yang sungguh menarik yang berjudul “The Stock Market Is Ripe for a Decline of Historic Magnitude”.

Artikel tersebut ditulis oleh Steve Hochberg dan Pete Kendall, yang keduanya adalah editor pada The Elliott Wave Financial Forecast, dan menurut saya ini patut mendapat perhatian Anda.

“Incredibly, the DJIA rallied back to a new all-time high, a move that generated a cornucopia of ever-higher projections.

The wide array of optimistic extremes in sentiment measures includes several readings that exceed the extremes of 2007, when the Dow made its previous high. With a finishing structure that Elliott Wave Principle describes as occurring at “the termination points of larger patterns,” the market is ripe for a decline of historic magnitude.

The sudden, loud chorus of market bulls, which has grown to a full-blown crescendo, fits perfectly with the terminal stages of a major advance. This chart shows the stunning breadth of optimism extending to every class of investor.

The first indicator (second graph) on the chart shows the percentage commitment to equities in the portfolios of members in the National Association of Active Investment Managers (NAAIM). The latest reading reveals an all-time high equity exposure of 104%, which means managers are in a leveraged long position for the first time in the seven-year history of the survey. The reading far surpasses the 83% level, which occurred at the October 2007 all-time high in the Dow.

A separate BofA Merrill Lynch survey of 254 fund managers confirms that money managers’ “appetite for risk in their portfolio” is at its highest in nine years. “An increasing number judge equities as undervalued – particularly in Europe.”

They soon will become even more “undervalued,” as the Euro STOXX 50 Index has traced out five waves down from its January 30 countertrend rally high, indicating that Europe’s bear trend has returned. There’s more: Even though Spain, Portugal, Greece, and Italy are de facto bankrupt, confidence is suddenly so high in that region that Europe’s junk-bond yields relative to investment-grade debt have collapsed to the lowest premium since the start of the global credit crisis. It is an astonishing and historic display of optimism relative to a collapsing economic reality.

The second indicator shows a major upswing in bullishness among options traders via the Credit Suisse Fear Barometer Index (the name is misleading since a rising index means less fear). This index measures trader sentiment by comparing the cost of three-month out-of-the-money calls on the S&P 500 relative to puts of the same duration. The recent extreme of 33.32 on January 25 is the highest in the history of the indicator, which goes all the way back to November 1994. The CBOE Volatility Index (VIX), which tracks the level of fear and complacency using the premium paid for at-the-money S&P options, declined to a low of 12.29 on January 18, its lowest reading – indicating the most complacency – since April 2007, just prior to the major top in the financials.

The third indicator shows a new optimistic extreme among investment advisors. The 15-day average of Market Vane’s Bullish Consensus rose to 68.2% in February, its highest reading since June 2007.

The bottom graph plots the total assets in the government money-market funds at Guggenheim (formerly Rydex), showing that the public is likewise complacent about the potential for a market decline. We’ve inverted the totals to align them with the trend in stocks. When people are highly confident that stock and bond prices will continue to rise, they see little need to hold money aside in money-market funds and instead load up on financial assets. The total holdings in Guggenheim’s money-market funds just dropped to their lowest level ever, reflecting a supreme confidence by investors and a full embrace of stocks and bonds.

At the opposite extreme, corporate insiders – investors who are presumably privy to the future potential of their companies – are dumping shares into the market at a furious pace. According to Vickers Weekly Insider Report, among NYSE stocks there were 9.2 insider shares sold for every share bought over the previous week. The last time the ratio of sales-to-buys was higher was in July 2011, just before the Dow declined 18% over the following four months. As we’ve said previously, there may be many reasons why an insider sells shares, but one of them is not because they think their price is going higher.

Taken together, the breadth of extremes shown on the chart indicates that stocks are not making a short-term top: these measures are all greater than at any time since at least 2007. This is a rare alignment that confirms this is an even more important, and more bearish, juncture than 2007.”

What Do the Charts Say?

Chris Rowe, penulis Technical Analysis Millionaire, memberikan peringatan yang jelas dalam laporannya yang berjudul “The Stock Market’s LYING to You”:

“My friends, you’re being fattened up for the kill!

I’ll explain…

Major market tops take months to form.  You would think that’s GREAT, considering it gives us time to lock in some hefty profits on our bullish positions.

But the longer it takes, the more euphoric people get… the more leverage they use… the farther away the thought of ever selling gets.

Then, when your position that was up 60% declines sharply, leaving you with only a 40% profit, you say “I’ll just wait until the next bump higher to sell.”  But after more downside you’ve only got 30% left and you’re considering buying more.

6 months later you feel like a fool for ever saying the words “I’ve only got a 40% profit on the table.”

Market tops can take several months to form, and if you understand the market topping process, you can make a killing. But more importantly, you can lock in your profits at great prices!

There are generally two types of stock market tops…

The typical market top, and the Whiskey Tango Foxtrot top (a.k.a. the WTF top).

It appears we are looking at a WTF top.

It’s quite simple really.

So this will be a short article, to explain.  But as simple as the explanation is, the psychology can rip peoples’ financial faces off, so please pay close attention (no matter how simplistic this may seem).

I’ve studied every market move that occurred over the last century+.  I started managing money in 1995 on Wall Street and after moving across the street from my office on Wall & Water st., I befriended many of the trading legends who lived through those times.

Below is a “quick-n-dirty” version of both types of market tops, seen above.

The “Typical” Market Top

1. The first big move off of a bear market bottom. The first move is the sharpest move because not only do you have bullish investors (investors who think prices will advance) plunging new money into stocks, but you have another huge group of buyers — those covering their shorts (exiting short positions by BUYING the stocks back).

Market bottoms are the opposite of market tops.  At market tops, there’s often euphoria where people are overly optimistic.  At market bottoms, people think the market will never go up again.  So short-sellers (those who are taking “bearish positions”) sell-short huge amounts of stock (with the intention of buying the stock back at a lower price).  But those short sellers realize prices are advancing and they have to cut their losses.  To do so, they buy back huge amounts of stock to close out their positions.

Thus, you have bullish buyers and bearish short sellers BOTH buying stock.  It’s a “short-squeeze”.

2. After the boldest investors squeeze the shorts out (causing the STEEPEST advance), we have a short correction followed by another move higher, albeit at a slower pace. The move isn’t as sharp.  Less aggressive buyers come in after they feel “the coast is clear”.

3. You get that final move higher. This upward slope is not as steep as the fist or second.  Here, institutional buyers (who tend to actually move market prices) are not buying.  They are selling into every upside move.  Sure, individual investors are buying like crazy as they watch the financial television talking heads say “markets are breaking highs”.

It’s super hard for the informed institutions to exit their positions without knocking stocks down, but they try for as long as they can without spooking investors, causing a selling panic.  But eventually they need to lock in their profits and WHAM!  Then they sell.

At this point, the short-sellers come in like a pack of hyenas surrounding a lame calf.  And they pounce!

Because the top is so obvious to these sophisticated investors, they go HEAVY on the short side.  They sell and they sell.  And after that, they sell more.

Remember, when they “sell” they are OPENING NEW POSITIONS by selling-short.  They hope to close the trade out later by buying at lower prices, profiting from the difference.  Boy oh boy do they go heavy.

And that brings us to the difference between the typical stock market top and the WTF top…

The “WTF!!??” Market Top

One of the most important and most profitable pieces of advice I ever learned from my mentor, early on, was to never forget “the unwind”!

What’s the “unwind”?

We’ll start simple:  When markets are moving higher and higher, at some point those stock owners must sell.  The more people buy more stock, the bigger position they hold and therefore the more stock they will have to sell to either take profits or to limit losses.

The bigger the position is (bullish or bearish), the bigger the move will be in the other direction when they realize it’s time to EXIT.

If an enormous amount of stock was bought, then when it’s time to sell the price should come crashing down hard.  Now flip that around.  If there’s an enormous amount of short selling then there’s only one way that huge position can be exited — with an enormous amount of BUYING.

Remember, that’s how the stock market BOTTOM was formed.  That’s why the stock market bottom has the steepest advance out of the three discussed above.

The difference between a typical top and a WTF top is that the short sellers pile up on that very obvious market top and then they get SQUEEZED!  Just like the first advance in a new stock market, the short-squeeze causes one final very sharp advance before the destruction of the bull market.

And that’s what is happening currently.  WTF!

So what does that mean to you?

I’ve been through numerous stock market cycles.  I’ve seen people get wiped out time after time and it drives me crazy!  It literally makes me sick to my stomach because it truly ruins lives.

I’m writing this to you today because I don’t want you to be one of those people.  You are about to get hit with a huge amount of stock market euphoria.  This could last weeks or months.

Markets will likely consolidate here for just a little bit (trade sideways with a few ups and downs but ending up around the same place).  But after that consolidation, it appears there will be one final hoorah!

This is awesome for those who recognize it.  It can be a huge money-making opportunity or a gift from the market gods of higher prices to exit at.  But if not played right, it can change a dream into a nightmare.

There are many ways to play it.  And in my coming articles I will reveal the best ways to do so.  But PLEASE be sure to start selling bullish positions into strength or to start hedging those positions.

You don’t want to get bearish too early if you’re not an aggressive trader.  And you can certainly take bullish positions here to capitalize on this short squeeze, but only do so after a short market correction.

We are right up against the upper part of a channel which I discussed last week.”

Terakhir yang tak kalah penting, adalah grafik FRED dari King Report, serta komentar langsung dari Bill King, yakni: “Stocks are in a parabolic rally and a blow-off has commenced.  No one knows the magnitude or duration; but this is the most dangerous condition for any asset.  The S&P 500 Index is in a crystal clear parabolic blow-off.  This used to be called a bubble.”

Seperti biasa di akhir tulisan agar kita tetap ceria di tengah-tengah pekerjaan kita, berikut saya lampirkan kembali sebuah gambar jenaka:

Terima kasih telah membaca dan semoga memperoleh keberuntungan hari ini!

Dibuat Tanggal 21 Mei 2013

“We don’t need QE, we only need it the way a heroin addict needs heroin. It’s not good.  It’s better to go through withdrawal and get the heroin out of your system. But we’ve got an economy that’s completely dependent on QE. That’s why it’s so screwed up. We need to break that dependency, but the Federal Reserve doesn’t have the stomach for that.  So they are going to keep on ‘fixing’ us with more and more damaging doses of QE.  We’ve built a consumption based economy where everybody borrows money and spends it. The only reason we can do it is because interest rates are at practically zero and we can service the enormity of the debt. But the minute QE goes away and interest rates rise, the party is over, the whole thing collapses. The Fed knows that. So they have to look for more excuses to keep supplying more QE, and keep interest rates at zero. Meanwhile, until we allow interest rates to rise, and allow a healthy restructuring of our economy, we’re never going to get a legitimate recovery, we’re never going to really have economic growth, we’re never going to create jobs. So we know we’re going to have an endless stream of quantitative easing. We’re going to have more QE’s than Rocky movies, until eventually it’s a horror movie and the whole thing implodes, and the economy literally dies of an overdose.”

– Peter Schiff

“The Federal Reserve here in the US recently announced they are willing to print over $1 trillion worth of paper in the next 12 months.  We can print as much money as we want but it’s not going to do any good. Unless the Federal Reserve comes up with a long-term plan for printing food, water, rare earths, silver, we are going to have serious problems because the paper will become worthless. Longer term, no one is going to keep giving you something that is critical and rare in exchange for something you can just press a button and print.”

– Stephen Leeb

Jika lembaga-lembaga pemerintah dapat dipercaya dan memiliki efisiensi, maka program Bernanke – quantitative easing (QE) – sebenarnya bisa berguna.  Namun Bernanke tidak pernah bekerja di lembaga pemerintah dan juga bukan seorang trader berpengalaman.  Sehingga langkahnya tersebut justru hanya menambah parah kondisi-kondisi yang telah berkembang, seperti malinvestment, fraud, mismanagement, korupsi dan lainnya.

Pada akhirnya pasar sendiri yang akan menjelaskan segalanya, dan ini bisa saja akan memalukan bagi Bernanke.  Seluruh stimulus yang dia kucurkan ke pasar akan menguap, dan satu generasi AS pun akan mengalami kehancuran secara finansial.

Terkait dengan hal tersebut, Hinde Capital (www.hindecapital.com) juga menyatakan bahwa sistem ekonomi adalah suatu candu seperti yang dijelaskannya dalam laporan di awal tahun yang berjudul “The Central Bank Revolution I – Well ‘Nominally’ So”:

“Central banks are the devil. They are like drug dealers except they administer regular doses of supposedly legally prescribed barbiturates to their addicts. The ‘easy money’ or ‘credit’ they create is an opiate and like all addictions there is a payback for the addicts, one exacted only in loss of health, misery and death.

The economic system is an addict, but that system is comprised of banks, corporations, non-profit organizations, small businesses all of which are communities. And what comprises communities, us, human beings – individuals. We are the addicts.

Popular economic academia understates human action in the economic equation of money. It is human preferences that determine our desire for goods and services and so in turn really determines the utility of money. Sadly the desire of the State to control money and administer it like a drug has left our economies unproductive and incapable of standing on their own two feet.

Our reliance on ‘easy money’ as facilitated by credit has become terminal. Like drug users we continue to attempt to find a heightened state of Nirvana. We continue to hark for the utopian days prior to the eruption of the post 2008 crisis, even though our well-being was fallacious and based on an illusion of wealth paid for by credit – a creditopia. The abuse of credit is what defined the Great Financial crisis and one that still defines our economic system and one which will define a much worse crisis to come.

Central bankers have begun a concerted effort to fight the global debt problem which has been stifling growth as tax revenues merely serve to finance debt servicing rather than addressing the repayment of principal outstanding. Omnipotent governors, Bernanke, Carney, Draghi, Svensson and Iwata or Kuroda (either are likely to replace Shirakawa) are to take a far more aggressive and activist role in pursuing a new framework for growth and inflation by seeking an alternative way to conduct monetary policy. It’s called Nominal GDP Level targeting and it is in our opinion as significant a moment as Volcker’s appointment to the Federal Reserve governorship in 1978.

Many will recall Volcker’s moment was to engineer a swift monetary contraction and deceleration of the money velocity to try and reign in excessively high inflation and stabilize growth. It worked. Today we are witnessing an ‘Inverse Volcker’ moment, whereby the opposite is likely true.

The question remains are they all still ‘inflation nutters’ as Mervyn King, the BoE Governor glibly referred to those central bankers who focused solely on inflation targets to the potential detriment of stable growth, employment and exchange rates.

Are central bankers merely expanding the boundaries of monetary largesse by focusing on a broader mandate and merely evolving the singular variable approach of inflation targeting or have they finally found a solution to eradicating boom bust business cycles? This is a question we need to answer as we are currently witnessing a Central Bank Revolution which could portend severe consequences for prices in our economies – and all the attendant misery that comes with very high inflation.

Nominal GDP Level targeting advocates believe they have a plausible case for a change of mandate by central banks and one which is being gradually adopted, but we believe that like central banks they have misdiagnosed the cause of the crisis by failing to examine the impact of credit creation in our global economy.

Money matters less credit matters more.

Global economies are still credit driven and Keynesian counterfeiting has merely arrested the collapse. The maintenance of heightened credit levels by financing of deficits with ‘easy’ money is beginning to see prices and output rise in the short term. In the long run only higher prices will remain whilst growth stagnates. A classic monetarist conclusion.

Hinde Capital has provided a long and consistent discourse on the relationship between credit and growth. Policymakers by now may well grasp that sustainable growth is not possible as nations still have an overreliance on credit-based sectors, namely the F.I.R.E. sectors, (Finance, Insurance and Real Estate). This is an understatement as all sectors are now directly or indirectly underpinned by this false mammon called credit.

Once upon a time merely altering the levels of money in the economic system could help an economy expand and contract without creating excessive levels of inflation both in asset, goods and service prices. However as this fiat currency regime has grown older so has the ability of central bank policy to contain large swings in the business cycle.

++++++

It is our contention that central banks feel they need to maintain the balance of credit in the system as it currently stands by adjusting the money supply and monetary velocity (MV) but by doing so they merely circumvent the necessary adjustment in the economic system that comes about by market failure. If they don’t allow this failure then any attempt to influence MV will only lead to higher prices (P) at the expense of output (T) in the famous monetary equation MV=PT.”

Lebih lanjut perlu diperhatikan pidato presiden The Fed wilayah Dallas, Richard Fisher, di depan Harvard Club New York pada September 2012 lalu.  Mari kita perhatikan sejumlah paragraf dari pidatonya tersebut yang menjelaskan alasan mengapa dirinya menolak kelanjutan QE saat mayoritas anggota dewan moneter lainnya masih sepakat untuk melanjutkannya:

“It will come as no surprise to those who know me that I did not argue in favor of additional monetary accommodation during our meetings last week. I have repeatedly made it clear, in internal FOMC deliberations and in public speeches, that I believe that with each program we undertake to venture further in that direction, we are sailing deeper into uncharted waters. We are blessed at the Fed with sophisticated econometric models and superb analysts. We can easily conjure up plausible theories as to what we will do when it comes to our next tack or eventually reversing course. The truth, however, is that nobody on the committee, nor on our staffs at the Board of Governors and the 12 Banks, really knows what is holding back the economy.

Nobody really knows what will work to get the economy back on course. And nobody – in fact, no central bank anywhere on the planet – has the experience of successfully navigating a return home from the place in which we now find ourselves. No central bank – not, at least, the Federal Reserve – has ever been on this cruise before.

This much we do know: Our engine room is already flush with $1.6 trillion in excess private bank reserves owned by the banking sector and held by the 12 Federal Reserve Banks. Trillions more are sitting on the sidelines in corporate coffers. On top of all that, a significant amount of underemployed cash – or fuel for investment – is burning a hole in the pockets of money market funds and other nondepository financial operators. This begs the question: Why would the Fed provision to shovel billions in additional liquidity into the economy’s boiler when so much is presently lying fallow?…

One of the most important lessons learned during the economic recovery is that there is a limit to what monetary policy alone can achieve. The responsibility for stimulating economic growth must be shared with fiscal policy. Ironically, and sadly, Congress is doing nothing to incent job creators to use the copious liquidity the Federal Reserve has provided. Indeed, it is doing everything to discourage job creation. Small wonder that the respondents to my own inquires and the NFIB and Duke University surveys are in ‘stall’ or ‘Velcro’ mode.

The FOMC is doing everything it can to encourage the U.S. economy to steam forward. When we meet, we consider views that range from the most cautious perspectives on policy, such as my own, to the more accommodative recommendations of the well-known ‘doves’ on the committee. We debate our different perspectives in the best tradition of civil discourse. Then, having vetted all points of view, we make a decision and act. If only the fiscal authorities could do the same! Instead, they fight, bicker and do nothing but sail about aimlessly, debauching the nation’s income statement and balance sheet with spending programs they never figure out how to finance.

I am tempted to draw upon the hackneyed comparison that likens our dissolute Congress to drunken sailors. But patriots among you might take umbrage, noting that a comparison with Congress in this case might be deemed an insult to drunken sailors.

Just recently, in a hearing before the Senate, your senator and my Harvard classmate, Chuck Schumer, told Chairman Bernanke, “You are the only game in town.” I thought the chairman showed admirable restraint in his response. I would have immediately answered, “No, senator, you and your colleagues are the only game in town. For you and your colleagues, Democrat and Republican alike, have encumbered our nation with debt, sold our children down the river and sorely failed our nation. Sober up. Get your act together. Illegitimum non carborundum; get on with it. Sacrifice your political ambition for the good of our country – for the good of our children and grandchildren. For unless you do so, all the monetary policy accommodation the Federal Reserve can muster will be for naught.”

(If you are interested, you can read the whole speech at:

http://www.dallasfed.org/news/speeches/fisher/2012/fs120919.cfm)

What Do the Charts Say?

Pernahkan Anda bertanya-tanya apa yang dibutuhkan untuk mendorong sedikit pertumbuhan ekonomi? Jika ya, maka 2 laporan Tyler Durden dari www.zerohedge.com berikut dapat menjawabnya:

1) The “Price” Of Record High Markets: $10 Trillion In Seven Years (May 2nd)

By now everyone, even CNBC, admits that the only reason stocks are where they are is due to the G-7 central banks. What many may not know, however, is how we got here, and where we will be at the end of this year. The answer, as provided by JPM Asset Management CIO Michael Cembalest in the chart below, is at the dot in the top right. This will represent the addition of $10 trillion in liquidity, or alternatively the conversion of the “planetary nebula” of central bank balance sheet expansion, in the past seven years. And considering that, as we explained yesterday, there is another $10-11 trillion in scarce “quality collateral” that has to be injected into the financial markets via central banks collateral transformations, the number in yet another 7 years will be at $20 trillion if not exponentially higher, or higher than where US GDP will be.

Cembalest’s take:

The planetary nebula of central bank balance sheet expansion (last chart), which we expect to hit $10 trillion later this year, is still the most important factor underpinning an uneven global recovery. It makes sense to have some patience right now. Global equities are up 8%-9% year to date, which is a pretty good return for a time when the profits expansion is slowing, global growth is closer to 3% than 5%, Chinese growth continues to cool down despite rapid increases in the use of credit, and when it is practically impossible to disentangle how much central banks are affecting asset prices. I read a research report that showed that returns on consumer staples stocks are now correlated 75% with the returns on Treasury bonds, by far the highest level since 1929. Usually, the correlation is close to zero…. Note to Fed: uh, congratulations?

Luckily, nothing bad happened in 1929.

The difference this time, as is now very obvious, is that in the event the central banks fail at preserving the perpetual growth of what may truly be the final bubble (yes, a preposterous assumption), the central banks are already all in, unlike all previous credit, risk-asset, and housing bubbles. So who becomes the “bad bank” to the central banks when confidence in the “lender of last resort” finally gives way? (emphasis mine)

Full note here

2) How Many Central Banks Does It Take To Generate 1% GDP Growth In 5 Years? (January 17th)

By order of their various ‘independent’ masters, the world’s central banks have “got to work” over the past few years. Running the printing presses under the guise of various multi-syllabic programs designed to optically lower interest rates and feed fungible resources to its banking systems – that will inevitably (surely) flow to the real economy and make everything right with the world. Well, perhaps the following chart will explain just how good a “job” they are doing with that real-world, real-economy recovery…

(h/t @Not_Jim_Cramer)

Berikutnya yang tak kalah penting adalah gambar bagan yang nampaknya menjadi pola pikir Bernanke saat ini:

Di akhir tulisan ini – dan juga tulisan terakhir saya pekan ini karena di akhir pekan mengisi seminar di Makasar Sulawesi – seperti biasa ada gambar dan pantun jenaka dari William Banzai:

This wizard of fiat is hip
He’s taken us on a strange trip
His plan for inflation
Is robbing the nation
Our wealth he is trying to strip

The Limerick King

Whenever Ben speaks it is “Big”
The markets he’s trying to rig
The future is set
It’s all about debt
To sheeple he’s shouting out “DIG”

The Limerick King

Dibuat Tanggal 16 Mei 2013

“The fact is, currency wars are fought globally in all major financial centers at once, twenty-four hours per day, by bankers, traders, politicians and automated systems – and the fate of economies and their affected citizens hang in the balance.”

– Jim Rickards, Currency Wars

Seperti pernah saya bilang akhir tahun lalu pada sejumlah seminar di beberapa daerah di Indonesia, bahwa nilai tukar dolar AS akan menjadi yang terkuat di antara mata uang utama dunia lainnya pada 2013 dan tahun berikutnya.

Ada banyak faktor yang akan mendukungnya, seperti dijelaskan oleh Charles Hugh-Smith dari Of Two Minds blog, dalam laporan yang berjudul “The Tailwinds Pushing The U.S. Dollar Higher”: 

“If we shed our fixation with the Fed and look at global supply and demand, we get a clearer understanding of the tailwinds driving the U.S. dollar higher.

I know this is as welcome in many circles as a flash bang tossed on the table in a swank dinner party, but the U.S. dollar is going a lot higher over the next few years. For a variety of reasons, many observers expect the dollar to decline against other currencies and gold, the one apples-to-apples measure of a currency’s international purchasing power.

The tailwinds pushing the dollar higher are less intuitively appealing than the reasons given for its coming decline:

1. The Federal Reserve printing another trillion dollars (expanding its balance sheet) will devalue the dollar because money supply is expanding faster than the real economy.

2. The Fed is printing money with the intent of devaluing the dollar to make U.S. exports more competitive globally and thereby boost the domestic economy.

Let’s examine each point.

1A. If much of the Fed’s new money ends up as bank reserves, it is “dead money” and not a factor in the real economy. Fact: money velocity is tanking:

1B. Money is being destroyed by deleveraging and write-downs. This is taking money out of the real economy while the Fed’s new money flows to banks.

1C. The purchasing power of the dollar is set by international supply and demand, not the Fed’s balance sheet or the domestic money supply.

As for point 2:

2A. Exports are 13% of the economy. A stronger dollar would reduce the cost of oil, helping 100% of the economy, including exporters. Why would the Fed damage the entire economy to boost exports from 13% to 14% of the domestic economy? It makes no sense.

2B. Most U.S. exports are either must-haves (soybeans, grain, etc.) that buyers will buy at any price because they need to feed their people (and recall that agricultural commodities often fluctuate in a wide price band due to supply-demand issues, so if they rise 50% due to a rising dollar, it’s no different than price increases due to droughts) or they are products that are counted as exports but largely made with non-U.S. parts.

How much of the iPad is actually made in the U.S.? Basically zero. Is it counted as an export? Yes. How much of a Boeing 787 airliner is actually manufactured in the U.S.? Perhaps a third. Sorting out what is actually made in the U.S. within complex corporate supply chains is not easy, and the results are often misleading.

2C. Many exports are made and sold in other countries by U.S. corporations, and so the sales are booked in the local currency. The dollar could rise or fall by 50% and most of the U.S. corporate supply chain and sales would not be affected because many of the goods and services are sourced and sold in other nations’ currencies. The only time the dollar makes an appearance is in the profit-loss statement at home.

Americans tend not to know that up to 75% of U.S. corporations’ revenues are generated overseas, in currencies other than the dollar. This may be part of Americans’ famously domestic-centric perspective.

2D. Most importantly, the American Empire needs to control and issue the global reserve currency. The Fed is a handmaiden to the Empire; the Fed’s claims of independence and its “dual mandate” are useful misdirections.

Some analysts mistakenly believe that Fed policies are aimed at boosting the relatively modest export sector (which we have already seen is a convoluted mess of globally supplied parts, sales in other currencies, etc.) from 13% to 14% of the domestic economy.

This overlooks the fact that the most important export of the U.S. is U.S. dollars for international use. I explained some of the dynamics in Understanding the “Exorbitant Privilege” of the U.S. Dollar (November 19, 2012) and What Will Benefit from Global Recession? The U.S. Dollar (October 9, 2012).

Which is easier to export: manufactured goods that require shipping ore and oil halfway around the world, smelting the ore into steel and turning the oil into plastics, laboriously fabricating real products and then shipping the finished manufactured goods to the U.S. where fierce pricing competition strips away much of the premium/profit?

Or electronically printing money and exchanging it for real products, steel, oil, etc.?

I think we can safely say that creating money out of thin air and “exporting” that is much easier than actually mining, extracting or manufacturing real goods. This astonishing exchange of conjured money for real goods is the heart of the “exorbitant privilege” that accrues to the issuer of the global reserve currency (U.S. dollar).

It’s important to put the Fed’s $3 trillion balance sheet in a foreign-exchange (FX) and global perspective:

- The FX market trades $3 trillion a day in currencies.

- Global financial assets are estimated at around $210 trillion. The Fed’s balance sheet is 1.5% of global assets.

The key to understanding the dollar and Triffin’s Paradox is that as the global reserve currency, the dollar serves both domestic and international markets. Of the two, the more important market is the international one.

To act as the global reserve currency, a currency must be exported in sufficient size to facilitate the gargantuan trade in a $60 trillion global GDP/ $210 trillion global economy. There are only two ways to export enough currency to be remotely useful:

1. Run massive trade deficits, i.e. import goods and export dollars.

2. Loan massive quantities of dollars to nations that will place the dollars in international circulation.

The famous Marshall Plan that helped Western Europe rebuild its economies was just that: a series of large loans of dollars to dollar-starved economies. This was necessary because the U.S. was running trade surpluses in the postwar era and was therefore not exporting dollars.

This leads to a startling but inescapable conclusion: no exporting nation can issue the global reserve currency. That eliminates the European Union, China, Japan, Russia and every other nation running surpluses or modest deficits.

Many commentators are drawing incorrect conclusions from various attempts to bypass the dollar in settling trade accounts. For example, China is setting up direct exchanges where buyers and sellers can exchange their own currencies for renminbi, eliminating the need for intermediary dollars.

This is widely interpreted as the death knell for the dollar. But this misses the entire point of the reserve currency, which is that it must be available in quantity for everyone to use, not just those doing business with the domestic economy of the issuing nation.

Here’s a practical example. The $100 bill is “money” everywhere in the world, recognizable as both a medium of exchange for gold, other currencies, goods and services, and as a store of value that is priced transparently (often on the black market). For the Chinese renminbi/yuan to replace the dollar as the global reserve currency, China would need to “export” enough currency to grease trade large and small worldwide, and enough electronic money to act as reserves that support domestic lending in nations holding the reserve currency.

This is yet another poorly understood function of the reserve currency: it acts as foreign exchange reserves, backing up the holder’s currency, and as reserves in its central bank that act as collateral for its domestic issuance of credit.

In other words, the U.S. has issued and exported trillions of dollars because this is the necessary grease for global trade, currency stability and issuance of credit by nations holding dollars. The U.S. didn’t run massive trade deficits by accident: it needed to “export” more dollars as the volume of global trade expanded.

Issuing credit and loans in dollars wasn’t enough, so the U.S. exported dollars in exchange for commodities and goods.

For China to issue the global reserve currency, it would have to decouple the yuan from the U.S. dollar and start running deficits on the order of $500 billion a year.

Many observers think China is preparing to back its currency with gold, and they mistakenly conclude (yet again) this would be the death knell for the dollar. But they haven’t thought through how currencies work: their value is ultimately set like everything else, by supply and demand.

In an export-dependent country like China, a gold-backed currency would not be exported in quantity–it wouldn’t be “exported” at all, because China “imports” others’ currencies in exchange for goods.

Assuming some of the gold-backed currency was exported, it would quickly end up in savings accounts or bank vaults, being a proxy for gold. There will be none available for facilitating trade in the $210 trillion global economy.

This dual nature of money trips up many analysts. Establishing a currency that is “as good as gold” but not exporting it in quantity means it will be hoarded as a store of value and be unavailable to facilitate trade. Money has to act both as a store of value and as a means of exchange.

This is why U.S. $100 bills are carefully stored in plastic in distant entrepots of the world, safeguarded as real money, available as a store of value and as a means of exchange.

Currencies can be exchanged in a Forex (FX) marketplace, but the reserve currency is the “winner take all” in the real world. If you hold out an equivalent sum in various currencies around the world, the trader in the stall will likely choose the $100 bill because he is not sure of the value of the other funny-money in his home currency and he knows he can easily exchange the $100 everywhere.

The other currencies might trade on the FX market at some percentage of the dollar, but in the real world they are effectively worthless because there aren’t enough of them available to establish a transparent, truly global market. To do that, a nation has to export monumental quantities of their currency and operate their domestic economy in such a fashion that the currency is recognized as being a store of value.

In a very real sense, every currency is a claim not on the issuing central bank’s balance sheet but on the entire economy of the issuing nation.

All this leads to two powerful tailwinds to the value of the dollar. One is simply supply and demand: as the global economy slides into recession, trade volumes decline, and the U.S. deficit shrinks. (It’s already $250 billion less than was “exported” in 2006.) That will leave fewer dollars available on the global market.

In the case of the U.S., which exports large quantities of what the world needs (grain, soy beans, etc.) while buying mostly stuff that is falling in price in recession (oil, surplus manufactured goods, etc.), the trade deficit could decline significantly. (It is currently around $40 billion a month.)

And what does a declining trade deficit mean? It means fewer dollars are being exported. The global GDP is about $60 trillion, of which about 25% is the U.S. economy. Into this vast sea of trade, the U.S. “exports” about $500 billion in U.S. dollars via the trade deficit. Put in perspective, it isn’t that big compared to the machine it is lubricating.

So what happens when there are fewer dollars being exported? Demand for existing dollars goes up, pushing the “price/cost” of dollars up–basic supply and demand.

The second tailwind is the demand for dollars from those exiting the euro and yen. The abandonment of the euro is already visible in these charts, courtesy of Market Daily Briefing: Peak Euros.

We can anticipate this desire to transfer euros and yen into dollars will only increase as those currencies depreciate. Let’s say, just as an example, $5 trillion in euros starts chasing $1 trillion in available U.S. dollars. What will that do to the value of the dollar?

Some ask why those selling euros won’t buy Chinese yuan. Where are you going to find $1 trillion in yuan? It isn’t even convertible on an open market, and since China is an importer of currency, there isn’t 1 trillion yuan floating around the global marketplace to buy even if you wanted to.

Many people scoff when I suggest the dollar could rise 50% (i.e. the DXY dollar index could climb from its current level around 80 to 120) or even 100% (DXY = 160) in the years ahead. I know it’s the highest order of sacrilege to even murmur this, but if global demand for dollars picks up, the Fed isn’t printing nearly enough to dent the rise in the dollar.

As a lagniappe outrage, consider the domestic fallout from a decline in U.S. stocks and the U.S. economy. The Fed’s precious horde of political capital will leak away, and its ability to print more money will be proscribed by political resistance and a loss of faith in the Fed’s claimed omnipotence.

Any reduction in Fed printing would only limit the quantity of dollars available to global buyers, further pushing up its price on the open market.”

What Do the Charts Say?

Meskipun saya pribadi tidak menyukai dolar AS, atau aset-aset yang terdenominasi dengannya, Saya harus mengakui satu hal positif bahwa dolar AS sebagai ‘safe haven’, yakni suatu tempat berlindung (natural hedge) terhadap kondisi ekonomi yang tidak menentu.

Berlanjutnya saham-saham menembus rekor tertingginya, yang seolah memperlihatkan pasang-surutnya fear-and-greed pelakunya, dengan ini saya rasa 3 grafik berikut akan memberikan analogi yang menarik.  Seperti dinyatakan oleh analis dari Citi, Tom Fitzpatrick, grafik-grafik terkini dari emas, indeks dolar AS, USDJPY memiliki persamaan yang menakjubkan dengan grafik masing-masing di tahun 2006/7, 1996/7, and 2000/1.  Jika sejarah berulang, maka saatnya untuk beli dolar AS:

USD Index

• We continue to believe that the present set up on the USD Index is very similar to early 1997 (16 years ago) and early 1981 (16 years prior to that)
• This suggests to us that a move towards at least 89.00-89.60 and possibly even as high as 95-97 could be seen this year.
• The bullish outside month seen last month has added further weight to this view.
• Interestingly the peaks in 1981 and then in 1997 were both posted in August. In 1981 that was about 27% above the 1980 close while in 1997 (which we favor more as a comparison) it was around 15.5%. A move like 1997 would suggest levels around 92+
• We continue to follow a similar path which would suggest a move towards 92+ by Aug-Oct this year.
• It is worth noting that both the 1981 and 1997 periods followed housing/credit/banking crises. In both instances the Fed eased rates and kept them too low for too long….in the 70’s period leading to a stagflationary environment.
• In addition the 1997 period followed the falling apart of the existing financial architecture in Europe (ERM) to be replaced by the EURO (Fixed exchange rate pretending to be a single currency) which is even more flawed than its predecessor.
• IF, as we expect, we get a move towards 92 on the USD Index this year we would expect EURUSD to at least equal if not exceed that percentage change. The 92 level is about 11.25% from the present USD-Index level. A drop from here of 11.25% in EURUSD would suggest at least a move towards 1.1500 in EURUSD

Source: Citi

Dan Dontrose, seorang editor The Fundamental View, sebelum Natal lalu memprediksi bahwa dolar AS akan menguat dan ternyata benar.  Berikut adalah penjelasan singkat terkininya mengenai indeks dolar AS dan beberapa grafik menarik untuk dilihat:

“The following charts demonstrate why we are on the precipice of gold’s future direction as well as the dollar’s direction. (HERE AND HERE). Laugh if you will but I am of the view that the dollar is the haven and will remain so for the foreseeable future.  Dollar doomsday prophets will argue the dollar is on its last legs but I would argue that it has taken a few punches but has survived.

Note the bull run it had between 1995 and 2001 when it reached its all time high on the index.  Ever since that time it has been on a decline with the blue line on the chart marking the upper line of the down channel.  Recently, I witnessed the possibility of the dollar putting in a double bottom.  Double tops and bottoms are usually seen at the end of longer term moves.  Based on the action of the dollar, it has now punctured through the top line of the bear market channel and has the potential to start moving up again. Now that the dollar has broken out of its down channel that had been in place since 2000, we may see the dollar start to come back to life, especially if we see, as I anticipate, a major stock market correction on the horizon.”

Apapun yang terjadi dengan dolar AS hendaknya bisa membuat kita terus ceria menjalani hari. Dan untuk itu berikut saya tampilkan gambar jenaka dari William Banzai:

Terima kasih telah membaca dan semoga beruntung saat ini!

Dibuat Tanggal 15 Mei 2013

“I would guess at the present time, given markets from the 2009 lows have in many cases increased by as much as 100 per cent, that they are no longer very cheap.  …. Something could come along, geopolitically or otherwise. I would be very careful being overweight equities.  In the 40 years I’ve been working as an economist and investor, I have never seen such a disconnect between the asset market and the economic reality… Asset markets are in the sky and the economy of the ordinary people is in the dumps, where their real incomes adjusted for inflation are going down and asset markets are going up…  Something will break very bad.”

– Marc Faber

Gambar di atas adalah sampul depan edisi terbaru majalah The Economist.  Seorang penasihat keuangan dan analis pasar, Peter Grandich, yang merilis The Grandich Letter (http://www.Grandich.com), mengomentari gambar tersebut sebagai berikut: “30 years of experience tells me when this is front page, start heading for the exits!”

Pasar finansial di saat ini memang menakutkan. Tanda-tandanya mengarah ke kita namun ketakutannya belum jelas terhadap apa. Yang jelas itu semua disebabkan oleh aksi tunggal yang mengatur masuknya dana ke sistem finansial oleh bank-bank sentral besar dunia.

Uang yang tercetak akan mengalir ke suatu tempat yang kemudian menjadi alasan utama mengapa bursa-bursa saham menembus rekor tertinggi padahal perekonomian merosot drastis. Bukan soal apakah bursa A atau B yang bubble, melainkan semua bursa, dan itu merupakan persoalan sistemik.

Seperti Mark J. Grant, penulis Out of the Box, pernah tulis dalam salah satu artikelnya beberapa waktu lalu, “We live in dangerous times.  Money created out of nothing and in such quantities that valuation is called into question.  Statistics made up and manipulated as a matter of due course and defended as preservation of the state.  Lies told with such straight faces and almost religious fervor designed to subdue the masses and place investors in a sterile coma where “fine” is the watchword of the marketplace.

It is all controlled, it is all manipulated but as the bills become due, as there is not enough cash in the drawers; events will happen, yields will rise, equity markets will fall and then a new and quite unpleasant set of circumstances and consequences will arrive.”

Kita jelas telah dibohongi dalam 4 tahun ini, namun menurut saya pada musim panas tahun ini akan menjadi momentum bangunnya orang-orang dari “Dunia Fantasi”.  Oleh karena itu mungkin akan menjadi hal yang bagus untuk melihat sejumlah prediksi apa yang akan terjadi di tahun depan.

Pertama dari pendiri Global Macro Investor, Raoul Pal, yang sebelumnya menjadi co-manager di GLG Global Macro Fund London untuk GLG Partners, adalah satu grup perusahaan hedge fund terbesar dunia.  Raoul pindah ke GLG dari Goldman Sachs, tempat sebelumnya dia juga sebagai co-manager untuk penjualan hedge fund produk Equities dan Equity Derivatives Eropa.

Raoul Pal pensiun dari pekerjaannya mengelola dana nasabah pada 2004 saat usianya baru menginjak 36 an sekarang tinggal di tepi pantai Valencia di Spanyol untuk menulis.  Salah satu laporan terbarunya, jika boleh dikatakan, adalah proyeksi masa depan yang paling menakutkan yang pernah saya baca. Dan laporannya tersebut berjudul “The End Game: 2012 And 2013 Will Usher In The End”:

“Consider this:

We are here…

• We don’t know exactly what is to come, but we can all join the very few dots from where we are now, to the collapse of the first major bank…
• With very limited room for government bailouts, we can very easily join the next dots from the first bank closure to the collapse of the whole European banking system, and then to the bankruptcy of the governments themselves.
• There are almost no brakes in the system to stop this, and almost no one realizes the seriousness of the situation.
• The problem is not Government debt per se. The real problem is that the $70 trillion in G10 debt is the collateral for $700 trillion in derivatives…
• Yes, that equates to 1200% of Global GDP and it rests on very, very weak foundations
• From an EU crisis, we only have to join one dot for a UK crisis of equal magnitude.
• And then do you think Japan and China would not be next?
• And then do you think the US would survive unscathed?
• That is the end of the fractional reserve banking system and of fiat money.

• It is the big RESET.

It continues:

• Bonds will be stuck at 1% in the US, Germany, UK and Japan (for this phase).
• The whole bond market will be dead.
• Short selling on bonds – banned
• Short selling stocks – banned
• CDS – banned
• Short futures – banned
• Put options – banned

• All that is left is the Dollar and Gold

It only gets better. We use the term loosely:

• We have around 6 months left of trading in Western markets to protect ourselves or make enough money to offset future losses.
• Spend your time looking at the risks of custody, safekeeping, counterparty etc. Assume that no one and nothing is safe.
• After that…we put on our tin helmets and hide until the new system emerges

And the punch line

From a timing perspective, I think 2012 and 2013 will usher in the end.”

Sejumlah analis finansial dengan grade-C kebingungan saat mengetahui bahwa Albert Edwards, analis yang paling bearish di SocGen, mulai berpandangan bullish dalam beberapa bulan terakhir ini, dan tulisan di bawah ini seharusnya bisa mengklarifikasi kebingungan mereka tersebut:

We still forecast 450 S&P, sub-1% US 10y yields, and gold above $10,000

My working experience of the last 30 years has convinced me that policymakers’ efforts to manage the economic cycle have actually made things far more volatile. Their repeated interventions have, much to their surprise, blown up in their faces a few years later. The current round of QE will be no different. We have written previously, quoting Marc Faber, that “The Fed Will Destroy the World” through their money printing. Rapid inflation surely beckons. But that will not occur without firstly a Japanese-style loss of confidence in policymakers as we dive back into recession and produce dislocative market moves.

Andrew Lapthorne passed me a great chart the other day of bond strategists’ forecasts. It reminded me of similar charts for analysts’ earnings forecasts from my former colleague, James Montier. There are some ever-present truths in this business. Economists usually forecast a return to trend growth and will never forecast a recession. Equity strategists tend to forecast the market will rise 10% each year and will never forecast bear markets. And since the equity bubble burst in 2000, bond strategists, in a discernible break in behavior, now only ever forecast that bond yields will rise (see chart below).

I agree that bond yields will indeed be heading higher in the next 3-5 years – much, much higher. But the consensus has still not accepted that we remain locked in an Ice Age environment that will see US (and UK and German) yields converge to Japanese sub-1%.

The late Margaret Thatcher had a strong view about consensus. She called it: “The process of abandoning all beliefs, principles, values, and policies in search of something in which no one believes, but to which no one objects.” The same applies to most market forecasts. With some
rare exceptions (like our commodity analysts’ recent prescient call for a slump in the gold price), analysts don’t like to stand out from the crowd. It is dangerous and career-challenging. In that vein, we repeat our key forecasts of the S&P Composite to bottom around 450, accompanied by sub-1% US 10y yields and gold above $10,000.

Some other thoughts from Albert on 10 Year bonds:

US 10y nominal yields have been edging down recently to 1.70% and the gap with real yields has closed ever so slightly, but the gap itself (implied inflation expectations) remains high.

There is much more, but the most amusing is where SocGen (Edwards) disagrees with SocGen (Legland) on gold:

We have been asked extensively about the slump in the gold price, especially in the context of our commodity strategist’s prescient report calling for just such a decline. My own view is that the reasons for owning gold have not changed. I expect imminent recession to be more likely than imminent takeoff and hence the real yield (a key gold driver) should remain low.

Gold corrected 47% from 1974-1976 before rising more than 8x to US$887/oz in 1980. A steep correction is normal before the parabolic move. As Dylan said in his note of Sept. 2011, The market for honesty: is $10,000 gold fair value?, holding gold is a bet against central banks competency and given their track record that’s certainly a bet I’d be happy to still take.

* * *

Hopefully this should eliminate any confusion where Albert stands: certainly not with the rest of the fair-weather, momentum chasing penguins.

What Do You Believe?

Brent Johnson dari Santiago Capital yakin bahwa ada sesuatu yang salah di dunia saat ini. Namun dia menulis pada awal laporannya, “while I am not naive to the way the world works, I at least want to try to make it better.” Dan Johnson lebih mengatakan apa yang dia yakini, daripada saran yang harus dilakukan di tengah harapan yang belum pasti. Menurutnya kita mungkin masih memiliki keyakinan yang sama… misalnya, keyakinan bahwa meskipun S&P 500 bangkit menembus rekornya, perekonomian riil belum bangkit; bahwa mempertahankan suku bunga di bawah 1% selama lebih dari 5 tahun merupakan indikasi resesi, atau bahkan depresi; serta fakta bahwa middle class jobs yang belum bangkit merupakan indikasi bahwa ekonomi bermasalah. Laporan singkat namun lengkap tersebut merupakan ucapan-ucapan mengenai persoalan hari ini – mari lihat seberapa banyak keyakinannya yang anda sepakat dengannya…

“I believe…”

• S&P is at highs but the real economy has not recovered
• Rates at 0% is indicative of a recession or maybe a depression
• middle class jobs have not returned signals an economy in trouble
• and that these the three put together is a major problem

“I believe…”

• it is impossible to borrow your way out of debt…
• or spend your way to prosperity
• our representatives in Washington do not think the rules of mathematics do not apply to them
• very few people understand the power of the exponential curve
• and recognizing it when its right in front of you (national debt)
• that this system puts our kids in jeopardy (owing $350,000 at the age of 4)
• most people think these problems are so far off in the future that it is senseless to worry about them now
• they are wrong

“I believe…”

• See Something, Say Something should be applied to our government – we should tell our neighbors what our government is doing

“I believe…”

• Nikita Kruschev had at least one thing right, politicians are the same all over, “they promise to build a bridge even where there is no river.”

“I believe…”

• Leadership starts at the top (and drops off fast from there) – and you gotta call them on their bullshit (Bush abandoning free-markets to save free markets & Obama ‘stopping these ridiculous wars’ and still fighting them 5 years late)

“I believe…”

• It is wrong that the Attorney General openly admits that large banks are ‘too big to jail’

“I believe…”

• It’s wrong when guys in suits and ties get off easy (Cassano, Corzine, Mozilo), yet organic farmers and young entrepreneurs have their business closed down and lives ruined – so the Justice Department can send a message that no one is above the law.

“I believe…”

• The greatest trick the world’s central bankers ever pulled was convincing you they were on your side.

They are not.

“I believe…”

• That Cyprus will not be able to live up to the terms of the latest bailout, and
• It won’t be long before the ECB comes back for round 2

“I believe…”

• Once the confidence in fiat currency is gone, it’s over…

“I believe…”

• It’s still a beautiful world, and that
• Most people want the same things in life, to be left alone to make their own decisions and live life the way they see fit

and one last thing

“I believe…”

It is better to deserve honors and not have them, than to have honors and not deserve them…

Seperti biasa di akhir laporan ini, saya akan mempersembahkan gambar lucu lagi dari William Banzai:

Terima kasih telah membaca dan semoga beruntung!

Dibuat Tanggal 14 Mei 2013

“The world is on a seemingly one-way trip to monetary debasement as the catchall economic policy, and there is only one store of value and medium of exchange that has stood the test of time as “real money”: gold.  We expect this dynamic to assert itself in a large way at some point.  In the meantime, it is quite frustrating to watch the price of gold fall as the conditions that should cause it to appreciate seem more and more prevalent.  Gold may not exactly be a “safe haven” in the sense of an asset whose value is precisely known and stable.  But it surely is an asset that, in a particular set of circumstances, becomes a unique and irreplaceable “must-have.”  In those circumstances (loss of confidence in governments and paper money), there are no substitutes, and the price of gold may reflect that characteristic at some point.”

– Paul Singer

Seorang manajer dana profesional, Dr. Stephen Leeb, yang menjabat sebagai Chairman & Chief Investment Officer pada Leeb Capital Management dan sekaligus penulis buku “Red Alert: How China’s Growing Prosperity Threatens  the American Way of Life”, baru-baru ini kepada King World News (www.kingworldnews.com) berkomentar mengenai aksi beli emas besar-besaran oleh Cina serta langkahnya untuk mendominasi dunia. Berikut adalah yang dikatakannya:

“I am focused on China right now.  The dollar is down against the euro today because Germany had stronger than expected industrial production, but nobody is really focusing on what’s going on with the Chinese Yuan and their massive gold purchases….

The Yuan is setting all-time highs.  China is playing the game and they are dominating right now.  Countries have been battling each other in order to cheapen their currencies.  The problem with a cheaper currency is that commodities cost more.  So China has decided to opt for a higher currency.

The move in the Yuan overnight was one of the most significant upticks I have seen.  Like I said, the Yuan moved to an all-time high.  The Yuan has advanced roughly 5% against the US dollar in just nine months.  China also imported over 200 tons of gold for the most recent month.  That is an extraordinary number.  At that rate that’s over 2,400 tons of gold per year on an annualized basis.

This simply speeds up the point at which China will be the largest gold holder in the world.  China saw gold come down and they didn’t just buy on the dip, instead they bought as much as the market would give them.  And, again, you see the Yuan going up so that is making the price of gold even cheaper for the Chinese.

It’s only a matter of time before the Chinese back the Yuan with gold.  This will push the Yuan front and center as a key element in terms of being part of the world’s reserve currency basket.  China gets the message.  They are doing whatever it takes to establish their dominance in the world, particularly in the commodity arena.  Their currency is flying and they are importing as much gold as they possibly can.

All of this spells incredible upside for gold.  Hang on to your gold, and buy more if it comes down in price.  And especially buy silver.  When gold takes off, silver will be gold on steroids.”

Berikutnya adalah Tyler Durden dari www.zerohedge.com yang juga melaporkan aksi beli besar-besaran di Cina baru-baru ini, yang menjadikannya salah satu pembeli emas yang paling antusias di Asia.  Di bawah ini adalah 2 tulisan terbarunya yang secara jelas menyebut bahwa Cina sedang menimbun emas:

1) Chinese Gold Imports Soar To Monthly Record On Insatiable Demand (April 8th)

In what must be an inexplicable move to momentum-chasers everywhere, as gold continued to decline in price in March, and long before its targeted smash in April, China was not backing off its gold purchases of the yellow product. Quite the contrary: as export data released by the Hong Kong Census and Statistics Department overnight showed, Chinese gold imports in March exploded to an all time record high of 223.5 tons. This follows 97.1 tons in February, and brings the total imports for the first quarter of 2013, or 372 tons, on par with what China imported in the entire first half. It also means that since January 2012, China has imported an absolutely stunning 1,206 tons of gold. Putting this number in context, this is 20% more than the entire reported official gold holdings of 1054 tons, and represents roughly half of the total 2500 tons of gold mined every year (a number which is set to decline as gold miners find current prices unsustainable and are forced to shut down production).

Comparison of Chinese gold imports: 2012 vs. 2013:

And sequential change in Chinese gold imports since January 2012 or when the gold fever in China was truly unleashed:

The latest official Chinese holdings:

And if March was a record month for China, we can’t wait for April when prices plunged and when physical buyers, who unlike paper momentum chasers buy more the lower the price falls will see the recent take down as a buying opportunity (if they can find physical of course). From Reuters:

Chinese gold imports are likely to swell further after more than doubling to an all time high in March as retail consumers pounced when prices plunged to a two-year low last month.

“Physical demand picked up significantly over the last couple of weeks. Consumers and industrial users tend to see price drops as buying opportunities,” Zhang Bingnan, secretary-general of the China Gold Association, told Reuters.

“Investment demand should continue to stay strong through the rest of the year because of limited investment alternatives,” said Zhang, adding that gold sales and processing volumes both spiked in April.

“April imports will be stronger than March,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong. “The world was buying gold and China was no different at all.”

And therein lies the rub: because if China fails to mask the ongoing soaring hot money inflows as reported earlier, and which amounted to over $180 billion in q1 as reported earlier, just watch as Chinese demand for physical goes truly off the charts.

The rest of the story is well known but here it is from Reuters:

In March, Shanghai gold futures fetched premiums of more than $30 to global prices, making it cheaper to buy the metal overseas.

April could see imports swell further after the drop in international prices spurred frenzied buying in Asia, leading to a shortage of gold bars and coins in Singapore as well as Hong Kong, which is China’s main source for gold imports.

The drop in prices has prompted a gold rush in China, with Chinese shoppers flocking to retailers to buy jewellery and bars.

A spokesman for Hong Kong jewellery chain Chow Tai Fook, the world’s largest jewellery retailer by market value, told Reuters that traffic at its China stores jumped by 50 percent during the May Day holidays.

The surge in Chinese travelers during the three-day May Day holiday also drove gold sales in Hong Kong to rise by an estimated 50 percent, with total gold sales from April 29-May 2 reaching some 40 tons, local media quoted Haywood Cheung, president of the Hong Kong Gold and Silver Exchange, as saying.

The jump in Chinese physical demand also prompted some banks to ship in more supplies from London and Swiss vaults, traders said.

What about New York vaults? And specifically the biggest gold vault in the world, located 90 feet below 1 Chase Manhattan Plaza?

Or is there maybe a correlation between the record drawdown in JPM’s commercial holdings and the record break out of Chinese gold fever? We hope to find out soon.

As for the increasingly irrelevant spot price of gold paper derivatives, we can only hope “experts” like Paulson et al can continue their liquidation of gold ETF “holdings” for as long as possible: after all one can buy far more gold more when the price is lower, not higher.

2) Eric Sprott: The Golden Answer To Chinese Import Data (April 12th)

Submitted by Eric Sprott, Etienne Bordeleau, and David Franklin of Sprott Group,

Manufacturing data in the last several months has suggested that economic growth around the world is slowing. However, China’s export growth surprised the market this week and unexpectedly accelerated in April, even as shipments to the U.S. and Europe fell. This has created a conundrum for analysts and market watchers. How can China be growing while the countries that purchase its exports are slowing? The numbers don’t add up.

Digging deeper into these figures, several analysts have come to the conclusion that the numbers are faulty. Bank of America Corp. and Mizuho Securities Co. analysts have gone so far to say the figures have been inflated by fake reports. An “astounding” 92.9 percent jump in exports to Hong Kong, the most in 18 years, raises questions on data quality, researcher IHS Inc. said. They even call some of the data ‘absurd’, suggesting that exporters are ‘faking orders’ to obtain export-tax rebates. These observations challenge the credibility of Chinese economic data once again.

It has been suggested that China’s robust appetite for commodities from iron ore to crude oil show that Chinese domestic demand is healthy, alleviating concerns about a renewed slowdown. China’s recent surge in gold imports puts this ‘increase in domestic demand’ observation into question. Our analysis shows that trade statistics are biased by the large gold inflows the country has experienced over the past few years. Because gold imports are accounted for in the “import” numbers of the current account (instead of the capital account like other investments), they artificially inflate the total import numbers published in the Financial Press. We say “inflate” because gold, unlike other materials, is mostly used for investment purposes and as such should not qualify as an import of “goods and services”, which is used to measure real economic activity. Now that China is importing significant quantities of gold, trade flow numbers are becoming more distorted.

When we strip out the ‘gold effect’, we find that 37% of the increase in imports over the last 12 months into China is due to the massive amount of gold that’s being imported. In Table A, gross imports increased by $82 billion, but $30 billion of this increase was from gold alone.  Put another way, more than one third of China’s import growth has been solely from its citizens’ desire to own gold and not from a growing domestic economy. (Emphasize mine)

Table A

Source: Bloomberg, General Administration of Customs (via Bloomberg), Census and Statistics Department – Hong Kong, Sprott Asset Management

Many analysts have attributed China’s increasing imports as signs of a healthy manufacturing sector, or increasing investments in infrastructure and property. Our simple analysis shows that more than one third of the increase in imports is due to China’s increasing gold consumption. We expect this will only increase in the near future when the explosion of gold buying in April is accounted for. New reports have suggested that Chinese housewives (affectionately known as ‘aunties’ according to the Beijing Daily newspaper) have purchased as much as 300 tons of gold in the past three weeks alone, worth almost $16 billion USD. This new gold buying could have a significant impact on Chinese import statistics and force analysts to reconsider the strength of the Chinese domestic economy.

What Do the Charts Say?

Emas masih berada dalam trend penurunannya saat ini. Namun penting untung diingat bahwa biasanya pergerakan terbesar terjadi di 10% terakhir dari trend yang berlangsung. Oleh karenanya, untuk saat ini mungkin emas sudah mendekati bottom-nya, namun tidak menutup kemungkinan bisa terjadi penurunan besar yang dapat menembus bottom sebelumnya.

Analis terkemuka dari Citi, Tom Fitzpatrick, seorang yang sangat yakin dengan logam kuning tersebut, memproyeksikan lonjakan emas setelah koreksinya.  Berikut yang dikatakannya mengenai tekanan emas belakangan ini, disertai dengan grafik yang mendukung:

“We were tracking a very nice base at around $1,525 on gold, and as you know we went through that base.  We went through that major support with a great deal of speed and that has created a very big clear out in the gold market….

If gold is moving off of a double-top, the target could be slightly lower than the recent area.  This would represent a move down to the $1,260 zone, which is very close to what we saw at the recent lows (roughly 5% lower).

If gold hits that target it would give you a high-to-low move of just over 34%.  This would coincide almost perfectly with the depth of the correction that we saw in 2008.  You have to remember at that time the gold market hit a low and bounced, but then proceeded to set another marginal new low shortly thereafter.

That turned out to be the bottom and the ultimate platform for a massive advance in the gold market.  So our feeling is to be a little bit cautious short-term.  There might be a little bit more turbulence, followed by a marginal new low.

But even if we see that take place in the gold market, we should remember what happened after gold hit that low in 2008.  Over the following three years the gold price virtually tripled in value.  We also believe that the gold price will eventually hit $3,500 an ounce.  If we were to hit a new low followed by a near triple in the price of gold, that would take you to the $3,500 target.

So as painful as this has been, we still view this correction as healthy in the overall context of a secular bull market which should continue for many years.”

Selanjutnya, adalah grafik Hulbert Gold Newsletter Sentiment Index, seperti dapat dilihat di bawah ini, menunjukkan sentimen bearish ekstrim dari investor di bursa emas.  Anda bisa lihat dimana bottom-nya atau setidaknya tahu arealnya, terutama jika membandingkan dengan yang terjadi dalam 15 tahun terakhir.

Kesimpulan

Andy Xie memberikan penjelasan yang sangat baik dalam laporannya baru-baru ini yang berjudul “The Enduring Glow of Gold”.  Di bawah ini adalah sejumlah paragraf terakhirnya, yang memberikan semangat untuk tidak menyerah saat penurunan emas belakangan ini:

“The recent sharp decline in gold prices has shaken the confidence of many people. Don’t worry. The price of gold has dipped, but will rise to new heights soon. In the long term, gold prices will rise far more than inflation. For the masses, gold is the best inflation hedge. It is the best weapon for the little guy to fight central banks that help a few to rob many.

Yes, gold doesn’t bear interest. Many, including Warren Buffett, belittle its investment value. But, paintings or antiques don’t bear interest either. When money supply is rising, anything scarce tends to rise in value. Gold is the best scarce commodity in the world. There are more artists that can paint more paintings every day. Eighty percent of the world’s gold has already been extracted. The remaining 20 percent will be dug up in the next 20 years. The money supply will grow forever. But the gold supply can grow only by 25 percent and no more.

The income growth in emerging economies will vastly increase with gold demand. When people realize how little gold the world has left, the price will skyrocket. If you don’t know how to preserve your wealth in an inflationary environment, you should accumulate gold. When the price comes down, just as it did two weeks ago, just buy more.”

Terakhir namun tak kalah penting adalah sebuah gambar dari Merk Investments yang mengilustrasikan dengan jelas apa yang terjadi di bursa emas global dan siapa yang akan memenangkan “currency wars” saat ini:

Dan berikut adalah sebuah gambar lucu agar Anda tetap ceria setelah membaca laporan ini:

Terima kasih sudah membaca, semoga memperoleh keberuntungan hari ini!

Dibuat Tanggal 13 Mei 2013