January 30, 2013
- Gun buyback goes wrong… meanwhile, one sheriff “needs you in the game”
- “We’re in full melt-up mode,” our technical guru “Gunner” writes… “and this market doesn’t give a [expletive deleted]“…
- Banks, tanks and diabetes… our stock mavens weigh in on the next sectors set to invade the mainstream airwaves
- Silver outdoes itself… again… a $2 million nickel causes a stir… the irony of our “Trade of the Decade”… the reality of the “God Switch”… the Annunaki? And more!
Could this be what the sheriff in Milwaukee, Wis., had in mind?:
Recovered at an anonymous Seattle gun buyback program
If you’ll forgive us, we begin today’s 5 with a few odd reminders of a forecast we made nearly two years ago.
“As this new financial crisis grows,” we wrote on June 23, 2011, “we expect it to play out on a local level first. Response times for emergency police and fire calls will drastically slow… Trash collection will drop from once a week… to once a month, if that. The roads around your home and on the way to work will get worse… as will security in the places you’ve come to believe are safe.
“Then the crisis will get bigger…”
Exhibit A: In their first gun buyback program in 20 years, Seattle police were, uh, shocked to find a shoulder-held rocket launcher. The program allowed people to “anonymously turn in weapons for a shopping gift card worth up to $200,” a report from The Associated Press details.
“The firearms collected included 348 pistols, 364 rifles and three so-called street sweepers, or shotguns that include a high-capacity magazine capable of holding 12 12-gauge shotgun shells.”
They failed to collect all the guns when the buyback program turned into an impromptu gun show.
“Police witnessed the exchange of the military launch tube near the gun buyback event,” AP goes on, “where gun buyers tempted those standing in long lines to turn in their weapons with cash.”
Meanwhile, in Milwaukee, a local sheriff urged the exact opposite….
Exhibit B: “I need you in the game,”Milwaukee County Sheriff David Clarke Jr. says in a 30-second commercial aired the radio in the area.
“With officers laid off and furloughed, simply calling 911 and waiting is no longer your best option. You can beg for mercy from a violent criminal, hide under the bed, or you can fight back. But are you prepared? Consider taking a certified safety course in handling a firearm so you can defend yourself until we get there.”
The radio spot suggests Milwaukee-area residents should learn to handle firearms so they can defend themselves while waiting for police. Personal safety “is no longer a spectator sport,” the sheriff warns.
As we said, a few odd reminders this morning the “mother of all asset bubbles” has hardly run its course yet. We’ve updated the special reports we released with our initial forecast. You can have a look here.
Pivoting to the markets real quick.
The S&P opened at 1,506, down a point but up 5% since the new year. The Dow is down 14 points, to 13,940. And the Nasdaq slid up 3 points, to 3,157.
“This week is backloaded with economic reports,” Greg Guenthner from our trading desk writes, “I count six today, nine Thursday and 10 Friday. Some more ‘important’ than others, of course. I even read an article calling it the ‘Super Bowl’ of economic data. Campy, but true — except this market doesn’t give a [expletive deleted].
“We’re in full melt-up mode,” Greg goes on, “so I don’t think a bad number from auto sales, unemployment, manufacturing or even GDP will phase it. Data like these only matter when they follow the story line set by price.
“If the market stumbles, pundits will quickly blame a missed number. But with euphoria firmly taking hold, ‘doesn’t matter’ will be the default reaction to any negative surprise.”
Case in point: An “unexpected” negative print on fourth-quarter GDP this morning. That’s right, the Commerce Department figures “the economy” contracted an annualized 0.1%.
No matter: “Unusual Quarter of Contraction Doesn’t Mean Recession,” says The Wall Street Journal. Buy!
“A Bank of America Merrill Lynch fund manager survey,” observes Chuck Gibson on his blog, Financial Perspectives, “shows fund manager bullishness at an extreme level:
‘Investors’ appetite for risk in their portfolios is now at its highest in nine years, while an increasing number judge equities as undervalued — particularly in Europe. Moreover, investors have reduced cash holdings to 3.8% from 4.2% in December. This marks the most positive reading of this measure of willingness to hold riskier investment assets since April 2011, though it has not reached levels that would represent a contrarian sell signal.’”
And “CNBC reports that bears are in the capitulation process:
‘A powerful rally in which virtually all fears have been bypassed has pushed stock market detractors to the brink, ready to wave the proverbial white flag as the only direction for the market seems to be up, up, up.’”
“They’re almost ready to throw in the towel,” Scott Bauer of Trading Advantage told CNBC. “I don’t want to say ‘capitulation,’ [but] guys down here really are saying, ‘All right, I can’t fight it anymore, let’s go.’”
Caveat emptor. Trouble with a “melt-up” rally is… it then proceeds to melt down. Gibson produces a couple useful charts if you’re a bear and feel the odd need to capitulate.
“I would like to temper all the enthusiasm with a brief splash of cold water,” Gibson begins…
“Roughly 80% of the components of the SPX are overbought (blue line) and we can see what follows (black line = U.S. stock market) when extremes of this magnitude (red line) occur:
Likewise, the current VIX – the market’s “fear” gauge — is lower than any reading since 2007.
“So we must wonder if the VIX may be descending into another extended period of bull market confidence,” Gibson wonders, “characterized by a lower VIX range with a bottom of about 10.
“We can’t rule that out, but we have so many other indicators that are overbought and long-term overhead resistance at about 1,550, that my best guess is that the VIX is warning us of an impending price top, not the beginning of a new bull market era.”
As we said, caveat emptor. If you’re planning to buy into this “melt-up” rally, be careful what you’re putting your money into.
“The big banks brush off new regulations as if they were breadcrumbs on their fat guts,” our managing editor Chris Mayer writes with another caution for the economy at large. “But they are killing the small banks.
“One way to see this is to look at the number of new banks people are starting. Check out this year-by-year tally from SNL Financial:
“Suddenly,” he goes on, “there are no new banks starting up anywhere. Zero. Might some of it be because of onerous post-2008 new regulations that make small-town, community banking unprofitable?
“Maybe you say, ‘Who cares? We have enough banks in this country.’ And maybe we do. Nonetheless, it shows a certain vitality has gone out of the sector — and perhaps it is a microcosm of what is going on in the economy at large.
“A country that grows over a hundred new banks per year has none for more than two years? I think that says something meaningful about the business climate in the country at large.
“Well,” Chris sardonically concludes, “at least interest rates are low.”
“Molycorp shares are crashing,” phoned a frantic journalist to our rare earths guru Byron King. “What’s going on?” The question brings us full circle from The 5′s coverage of a very similar question around this time last year.
MCP shares dropped a few weeks back from around $11 to near $8, which has some investors worried about the broader rare earths (RE) space. But as Byron puts it, “Molycorp’s problems start with Molycorp.”
MCP’s products rely on “light” RE elements, meaning that chemically, they have lower atomic numbers. The lower the atomic number, the more common the element, “which commands the weakest price supports. Thus the lowered estimates,” explains Byron. Not to mention that their customer orders have been delayed and management confirmed poor outlooks for RE prices.
“That higher share price” he recants, “seemed like a speculation to me. It was mostly based on media reports that Molycorp could be a takeover target — by a ‘defense company,’ no less.”
“News flash: Defense companies have big problems to worry about just now, with looming government defense cutbacks and contract cancellations. They don’t need to take over financially troubled companies that are being investigated by the SEC.”
It turns out that the broader RE space doesn’t share MCP’s outlook. The key is looking for companies “developing ‘heavy’ RE resources — the higher atomic number elements.”
For these companies, Byron explains, “there was no selling roller coaster or other market blowback from the Molycorp meltdown, which is an improvement in market understanding compared with other times in the past.”
“Diabetes was one of the first diseases described by ancient scientists,” our tech maven Patrick Cox writes with a new update in his round of breakthroughs.
“Greeks, Indians and Egyptians described the life-shortening condition, easily diagnosed by an excess of sugar in urine, and its many complications. It was not until 1922, however, that the first effective treatment, insulin, was introduced — extending and improving the lives of diabetics significantly.
“If you’ve studied diabetes, you have almost certainly ‘learned’ that there is no cure for the disease.”
“In the U.S. alone,” Patrick writes, “the diabetes drug market is estimated to be worth $15-20 billion annually. The rest of the world offers a market at least that big.”
Also, Type 2 diabetes costs the U.S. about 10 times that amount, Patrick says.
And the rest of the world? “Almost one in 10 Chinese has diabetes. India has similar rates, and wealthy Japan has even higher levels of the disease.” As populations continue to age all across the world, this problem will only get worse.
“Fortunately,” says Patrick, “a remarkable Israeli scientist has developed an elegant and relatively simple means of genetically engineering a solution to the problem. One tiny company, incorporated in America but with roots in Israel, has what I believe will be an actual cure for many diabetics and a vastly improved therapy for those it does not cure completely.
“Let me warn you right now, however, that the biotechnology this company has developed is so revolutionary and so unexpected, very few analysts or investors grasp the scope of its potential.”
[Ed. Note: Although Patrick has yet to label this company as a "buy" due to slim trading volumes, he patiently awaits the right time to jump in on this opportunity... as you may be aware, you can get a "package deal" for Chris', Patrick's and Byron's recommendations, the offer to do so ends at midnight tonight. We call it Equity Reserve, and it includes nine of our best stock advisory letters in one convenient "box."
The bundle covers every stock you would want to consider, even in a melt-up rally: income... value... small-cap... growth... financial... commodity... tech... even special situations. Click here for all the details. The offer ends at midnight tonight.]
Gold is up $13.30, to $1,677, as we write. Silver is up a half-dollar, inches away from $32.
Despite production shutdowns, the U.S. Mint just revealed they’ve sold a record-breaking 7,422,000 Silver Eagles within 13 business days in January… 1.5 million since production started back up Monday. This clobbers last year’s record-breaking 6,422,000.
“The sad part is my mother had it for 30 years and she didn’t know it,” said Cheryl Myers. Her mother had a coin in her closet for 30 years that may soon fetch upward of $2 million.
The 1913 Liberty Head nickel, on top of being illegally cast, has had quite an interesting past. It was discovered in a fatal car accident, declared a fake and then stuffed in a dark closet for decades. Only recently it was found to be genuine, and only one of five that exist in the world.
Only now is it causing potential bidders to drool. The Virginia siblings who currently own it are looking to make a pretty penny, and they won’t be disappointed. “Basically, a coin with a story and a rarity will trump everything else,” said coin curator Douglas Mudd told.
[Ed Note. While buyers are drooling over this coin... you should check to see if you have any of these coins. I'll bet that if you've made any purchases in the past 24 hours, you've come across one without even realizing it. And the immediate gains it could provide would be worth looking in your pockets.]
“I find it rather ironic that you take credit for the new ‘Trade of the Decade,’” one reader writes as we peek into the mailbox. “Japanese stocks, going up after huge gov stimulus is announced. Isn’t gov stimulus something you hate and the cause of all the world’s money problems? Of course, stocks will rise in the short term after huge gov support is announced. The same can be said for the U.S. stock market, and you hate that and are always predicting a crash at some point in the future…
“With Abe’s promise to print yen into infinity — and the consequent 12% drop in the yen, the Nikkei has naturally responded by revaluing stocks higher. This breakout is a purely monetary phenomenon. Let’s see what happens in Q3 or Q4 when the Japanese trade balance goes negative, shall we? Japan’s 260% debt-to-GDP ratio means that Japan cannot inflate their way to growth. Their interest payments will explode exponentially while their growth may grow arithmetically. Japan is a train wreck waiting to happen.
“The ‘Trade of the Decade’ better be a short-term rental, because Japan is going to be the first big economy to implode. That won’t be good for their stocks, so your Decade traders better keep their fingers on the mouse button.”
The 5: “Hate” is such a strong word. We’re only calling them as we see ‘em.
“On another tack,” another reader writes, “has anyone realized the great potential, even within religious circles, for the ‘God switch’ to become reality? With a relatively short (in cosmic terms) life span, humans are virtual prisoners on our personal rock in space.
“Outside of long-term cryogenics — where the frozen section must trust cruise control and the sanity of lengthy sleep-deprivation minds — the only hope to spread the spore of humankind into the galaxy and beyond is extremely long life.
“Perhaps now the Mormons can go looking for Kolob, the Seventh-day Adventists can select the required 240,000 (or whatever number) to leave into the heavens and even Sherry Shriner’s followers can make a reasonable attempt to contact the Annunaki before the Annunaki contact us.
“Upside, maybe corporations will have to take the long view; downside, retirement age will likely go up. Even better, we’ll get to see just how long term the effects of our current chemical use and financial mismanagement really are.”
The 5: Ummn…
The 5 Min. Forecast
P.S. When many readers requested “great stock plays without options,” we listened… and created the Equity Reserve. Tonight, though, that well runs dry and our offer to get in at the best price possible ends at midnight. If you’ve been interested in getting all of our best stock plays in one go, you can check out this special offer, here.