What We're Reading

In Game of Thrones, one of my favorite shows today, you either win - or die.  Usually via beheading.

Such is the same with iron ore miners.

In a industry with heavy debt, production continues with smaller players possibly undercutting prices to gain or retain market share but can they continue against larger players such as BHP and RTP or is the Game of Thrones strategy to give big players an M&A opportunity?  ft.com takes a look.

Seasonal demand is just what it sounds like.  What seasons certain things see higher demand such as natural gas for A/C and heating or gold for jewelry manufacturing and sales.  With that in mind I thought I'd flip through our Seasonal Charts for hints of possible trades here and in the months approaching.  My unscientific belief has been that larger players begin to buy long futures contracts before the season hits so I begin to watch for divergences and support in charts.  Click on the charts below for a better view.  Let's take a look:

Consumer Staples Which can be traded via $XLP or one of it's components are items which consumers feel they cannot do without.  They're considered non-cyclical, meaning that they are always in demand, no matter how well the economy is performing (or not performing).  Think diapers $KMB, personal hygiene $PG, discounters like $WMT, beverages such as $KO, cigarettes $MO and $PM, pharmacies such as $WAG and $CVS.  There are many other names, b

Crude oil today with a draw instead of a build and Summer driving season soon to begin.  It is what it is, bullish $USO.

• Stocktwits: "investor say the bottom is in for gold"
• Hey, wait a minute.  Didn't StockBuz say watch for a gold (GLD) weekly right shoulder to form back in March and early April?  Even posting on the gold miners here.  We're ahead of the herd once again......maybe.   (click image to enlarge)  At least risk is minimal; stop below $120
• SINA pre-announced an earnings beat but also announced it has received two notices from Chinese regulators stating its "License for Online Transmission of Audio-Visual Programs would be revoked due to certain unhealthy and indecent content from third-parties or by users" on Sina.com and its affiliated online literature site.  Ouch!
• JPMorgan becomes the first to warn on trading revenues in Q2, expecting markets revenue to slip 20% after declining 17% in Q1.
• AAPL wins a Federal jury decision again Samsung on smart phone patients but it's a victory for Samsung with less than 10% sought, actually being awarded ($120m vs. $2bil).  The jury rejected Ap

Amazing the shift since oil rigs were shifted from gas to more of the black gold AND with Bakken coming on line yet sadly, gasoline at the pump has tripled........smh

In the span of a mere four years, U.S. production of crude oil has surged by 67%, according to the Dept. of Energy, reaching levels not seen since the late 1980s. Crude production is up 14% in just the past year. This is the fruit of new fracking technology and it is nothing short of astonishing. Natural gas production is up almost 40% over this same period, and—since natural gas is not easily exportable—this has resulted in a two-thirds decline in the price of natural gas, which in turn gives our energy-intensive industries a big competitive advantage. All of this adds up to a huge boost for the U.S. economy, and it has nothing to do with any government initiatives or infrastructure investment. Indeed, it comes despite Obama's reluctance to approve the Keystone pipeline.

Mark Perry has been doing a terrific job of cov

La Nina, an ocean-atmosphere phenomenon where the sea surface temperature across the equatorial Eastern Central Pacific Ocean is lower than normal, tends to bring heavier than normal wet weather to the U.S. Midwest.  Yes, blame La Nina for the record snowfall the last few months.  It's all her fault.

El Nino on the other hand, brings warmer water to the sea surface and has a tendency to bring the exact opposite so you're talking possible drought conditions BUT just where does that wet weather go?  To coastal regions in the U.S., Chilean, Peruvian, New Zealand, and Australian coasts, among others.....causing landslides and affecting those crops.  As an example, an increase in monsoons in India could affect their sugar cane crop while drought-like conditions in the U.S. Midwest would affect corn and soybean outputs.

Just how strong El Nino will be remains to be seen but more than a few believe it's going to be a hot one.  ABC News Meteorologist Melissa Griffin says the pending El Niño

It may not be a popular view but then again, when everyone's on one side, doesn't the market tend to do the opposite of what's expected?  It seems the Elliott Wavers of the blogisphere are calling for gold to head lower here but I stand by my call of last week that the low will hold and we'll see a head-and-shoulders bottom (right shoulder) forming here.  Silver and all of the miners reflect a similar pattern, as posted here at StockBuz last week.  The weekly even resembles a possible double bottom.  Wouldn't that be sweet!  At the very least, down side risk is defined (last weeks low) but with fear in the market and heavy selling continued after the first of the month, utilities (safe haven) are already hitting a new high and I believe flight to precious metals will continue as well.  At least in the near term.  Not a long/hold.

• For all the worrying about weather impacting job creation, Trim Tabs say real time tax receipt data (allegedly more reliable than BLS data) suggests that the economy has been picking up steam.  24/7WallStreet
• A 8.2% magnitude earthquake overnight off the coast of Chile with a 2 meter tsunami.  Supposedly mining operations have not been affected buy you try to tell that to silver and gold this morning.  They're not buying it (so far)
• Interesting metrics from Flurry on mobile usage today.  GOOG accounts for 18% of time spent by consumers which includes YouTube, while FB is 17%.   Android web browsing is losing market share, going from 20% or usage down to 14%
• Facebook apps continue to hold strength ahead of Google according to Comscore data..  Twitter's app was only used by 22.8% of U.S. smartphone users in January. 77.6% used Facebook's core app, and 27.5% Instagram. Five different Google apps were used by over 40% of users.
• The Affordable Care Act (Obamacare) met it's targ

Sometimes it pays to simply remove the distraction of moving averages and let the chart movement speak for itself.  What say you StockBuz?  Are those head-and-shoulders bottoms or no?  Long gold and silver (and miners) with a stop below last weeks low (to your tolerance).  Partial on a breakout, move up stops to b/e, final target equal to distance of head to breakout zone.  Call it flight to safe havens, call it massive short covering/profit taking, .  Who cares.  The risk/reward is irresistible.

• The argument to lift the ban on crude oil exports Bloomberg
• How big oil (and Senators) are positioning at the Senate Energy and Natural Resources Committee Bloomberg
• A 3pm gold "fix"?  This study says it began in 2004. Bloomberg
• That's what I've been saying.  Fed may have to let inflation run hot to meet goals. Reuters
• Markets spooked as confirmation came of Russian troops taking over two airports in the Crimean area of the Ukraine.  UN to hold closed-door session this weekend to discuss situation. Reuters

If so, blame Mother Nature.  I dread seeing my next heating bill and will most likely be selling a kidney on Ebay to cover the cost.  A 2011 research paper by James Hamilton highlighted how historically, recessions occurred after a spike in crude oil prices.  Well what do you think we're witnessing in nat gas here?  Sure, it's an enormous short squeeze but what will the record snowfall, cold temperatures AND a spike in natural gas do for revenues, earnings and consumer spending? 

I'm surprised MSM media isn't talking about this more.  Sure, they're mentioning the slow down in the retail sector (charts already showed that) but what about the "R" word?  Oh wait, their job is to prop up and distract "entertain".  I almost forgot.

It's one thing when prices are lowered to spur demand.  It's an entirely different situation when buyers "demand" lower prices and can hold out until they get it.  Potash names such as POT, MOS and IPI saw a 20% haircut in market cap last month even though potash prices themselves had not "plummeted" as forecast.   So which is the tail and which is the dog?  It would appear the stocks definitely were the leading indicator.   This from the WSJ may just be the tip of the iceberg lettuce.

"Indian potash buyers are (now) demanding discounts for the price of the key fertilizer ingredient as the Russian miner that shook up the sector's cartel system last month ramps up production, threatening to send prices tumbling.

The moves will further pressure shares of global potash miners, who have already lost up to 20% of their stock-market value since Uralkali said in late July that it was pulling out of one of two sales partnerships that together control two-thirds of the nearly $22 billion

"A couple of weeks ago, we recommended to clients to buy the September Natural gas $3.50-$3.60 put forabout $500-$900/contract for a potentialprofit of $1200-$2,000 (3x to 5x) return over the next month." From Cumberland Advisors hat tip @Ritholtz

However GannGlobal is proposing a runaway move in commodities is fast approaching.  If you're a believer in "herd" mentality (that big investors move together as a herd and the herd moves the market), you may wish to checkout their video and register for their free webinar

This would make sense with the breakout in BDI in late June  (see my prior blog posts in February and March) as well as the theory that the next step for China is to build out their rail system to connect their (ghost) cities and dramatically improve their distribution channel, connect people to jobs and lower costs.

If this move in commodities were to take place, we as investors, would want to establish positions in commodity futures and/or equity/producer names (or co

[Edited October 15, 2012 to add Reuters link and Citicorp PDF ]

Natty outperform black gold?  Texas tea?  Yes it's happening and the intriguing part is it could continue.  It's unimaginable, unheard of, pure heresy but it at the same time, appears to be the Captain Obvious trade to these novice aging eyes.  While I'm no guru and don't begin to know it's intricacies, allow me to explain from a technical analysis and common sense point of view.  [CLICK ON ANY CHART TO ENLARGE]

#1  Falling crude oil demand in developed countries continues and this decline is expected to continue going forward......while increasing demand is expected in developing countries however I doubt quite a rapid increase given the status of global economies at this point in time.  Main point however, is that the U.S. itself is not expecting to increase its demand any time soon.

On a side note, the EIA expects more U.S. homes to use more heating fuels this Winter. [See report] BP, Shell and others are pushin

"I've just completed a new research paper that surveys the history of the oil industry with a particular focus on the events associated with significant changes in the price of oil. Here I report the paper's summary of oil market disruptions and economic downturns since the Second World War. Every recession (with one exception) was preceded by an increase in oil prices, and every oil market disruption (with one exception) was followed by an economic recession."

The table above itemizes the particular postwar events that are reviewed in detail in my paper. The paper also provides the following summary discussion:

The first column indicates months in which there were contemporary accounts of consumer rationing of gasoline. Ramey and Vine have emphasized that non-price rationing can significantly amplify the economic dislocations associated with oil shocks. There were at least some such accounts for 5 of the 7 episodes prior to 1980, but none since then.

The third column indicate

RJ Insights.pdf

Mining stock recommendations, observations on Dollar/Gold rallies.

IKN44_Mar10.pdf