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Quote of the Day

Monday, March 05, 2012

THE MOST RECENT DOW THEORY LETTER HAS JUST BEEN POSTED TO OUR SITE

 

March 5, 2012 -- The ides of March. Ides -- a day approximately in the middle of the month. It's dark, and it's 5AM in the morning, and I creep to a sturdy chair in the basement of my house and sit myself down. I'm faced by a trio of three computer screens. My computer gives me the stock story along with the nightly futures. The market hasn't opened yet. I pick a sturdy, heavy chair in deference to my still mending broken hip. A light chair might slip, dumping me on the floor and maybe breaking (God forbid) something in my aching body again.

 

I look at the computers. The Dow futures are down by 1900, leaving the Dow at 12949. The gold futures are down 52.8 putting April gold at 1706.88. Is this going to be the same old story -- Dow still below 13,000 and gold still below 1800?

 

As for the Dow, it's selling with an average dividend yield at just 2.5%, which by Charles Dow's standards renders it mighty expensive. To get any yield, you have to buy the Utilities or selected REITS or some preferreds. The big trusted stocks like Abott or Johnson & Johnson or Pepsi give you a grudging 2 to 3% dividend yield although they do raise their dividends year after year. Treasuries provide you with zero or minus yields. So in general, the lttle guy is stuck with whatever meager money his salary brings in after taxes. And as for savings, well, that's just the dream of a decade ago.

 

If the little guy is lucky enough to have a real job, he's angry at the big mucky-mucks on Wall Street or at the bankers who are pulling down millions. These guys ("the suits") appear on Bloomberg with their green-striped or purple silk ties and talk about Greece or whether auto sales are flat or going a bit higher.

 

Meanwhile, we hear that the majority of babies in America are born via unmarried mothers, and half the teen-aged kids (18to 25) can't find a job. If a kid has a job maybe flipping burgers he or she is riding high with her rare position -- she can buy her CDs with real cash instead of forking over the money to her parents for rent.

 

Yes, there;s a new "feeling" creeping intoAmerica: some call it "pay as you go," and others call it "cash on the line." Bill Gross of mighty PIMCO refers to it as "the new normal."

 

Last night I watched relatively new houses in South Florida actually being auctioned off on TV. Houses that cost $200,000 to huild a few years ago were being sold over the air for $45,000 and $48,000. These were 1800 sq. feet homes on quarter acre lots. They were touted as money-makers: "Buy 'em, rent them out to the snowbirds from the North for six months every winter -- and pocket the profits. Hey, these homes are dirt-cheap, they're going fast, and there aren't many of them left." BUY three or four of them with very little cash down and have yourself a long rest in sunny, warm Florida.

.....................................

 

According to The Economist. we're seeing the beginning of the end of Russia's ex-KGB boss, Vladimir Putin. Putin's popularity has collapsed, and he's back in the Kremlin, courtesy of a manipulated voting process, and the general sentiment is to get the crafty dictator out of office.

 

How does Costco do it? I bought a one pound bag of frozen blueberries at Trader Joe's for ten dollars, a price that is below what I can buy them for at one of the big grocery chains. Then I went to Costco and for the same ten dollars I bought a FIVE pound bag of blue berries. The big chains should be making a killling with their mark ups, I thought. No, the difference is the cost of the unions, I realized Trader Joe has no unions and I doubt if Costco does either.

 

I know there are large short positions in gold and silver at the COMEX. I've long wondered whether the price of these two precious metals have been manipulates lower by the shorts. Therefore I was interested in this letter that was published in one of Dennis Gartmans' recent reports.

 

Dear Dennis,

 

Hope you are well. Regarding yesterday's action in the precious metals, I have a different take on this than you do. As I have very intimate details of yesterday (and) think it was indeed official selling. At the London fixing, an order came in to sell 3 million ounces of gold and it was explicitly ordered to be done in just a few minutes. No investor or speculator would (1) handle it this way, (2) do it at the fixing only.

 

This has happened this way three times in the last year, yesterday being the fourth time. Bernanke had done nothing yesterday to trigger this the way it happened. I have done this now for thirty years, and this was no free market. We will find out one day.

................................

 

A new Golden age? Two new books state that the years ahead will be brighter than we think. We will be blessed with all sorts of new scientific or technologic inventions that will make life easier and even cheaper with a lot less manpower. For instance, in the works is a device which will give us instant print-outs of our DNA and tell us what diseases we are undergoing and what may come up. Our autos will have self-driving devices that will steer our cars and slam on the brakes if we are in danger.

 

The Russell take -- wonderful, but what about employment? Each new device will replace a large sector of labor, and in the end the huge task (it's now starting) will be to find jobs for a population that has lost its employment through "make it easy and automatic" science. Aren't jobs going overseas bad enough without amazing new machines that will replace thousands of workers?

 

TODAY'S MARKET ACTION:

 

My PTI was down 4 at 6381. The moving average at 6348, so my PTI is bullish by 33.

 

The Dow was down 14.76 to 12962.81.

 

Transports were down 34.39 to 5125.74.

 

Utilities were up 0.76 to 454.51.

 

NASDAQ was down 25.71 to 2950.48.

 

S&P 500 was down 5.30 to 1364.33.

 

There were 1021 advances and 1817 declines on the NYSE.

 

There were 81 new highs and 41 new lows.

April light crude was up 0.02 to 106.72.

 

Total Volume on the NYSE and associated exchanges was 3.4 bn.

 

Bonds: Yield on the 10 year T-note was 2.02. Yield on the long T-bond was 3.16. Yield of the 91 day T-bill was 0.066%.

 

Dollar Index was down 0.06 at 79.41. Euro was up 0.21 at 132.27. Yen was up 0.54 at 122.79. Currency Prices as of 1 PM Pacific Time.

April gold was down 5.90 to 1703.90. May silver was down 0.83 to 33.69.

 

My Most Active Stocks Index was down 11 at 289.

 

The Big Money Breadth Index was up 2 at 1022.

 

GDX was down 1.17 at 53.62.

 

HUI was down 10.24 to 513.14.

 

CRB Commodity Index was down 1.72 at 319.45.

 

The VIX was up 0.76 to 18.05.

 

Permanent Portfolio Fund (PRPFX) was down 0.25 at 49.12 (previous day closing). YTD Return: 6.60%.

 

Late Notes -- It's a tedious trendless market. The Dow futures are lower every night, and the Dow spends the rest of the following day trying to close above 13,000.

 

Same with gold. Gold is down in the futures every night, and spends the following day trying to rally towards 1800. Neither the Dow nor gold seem able to get over resistance. Yeah, I know it's tiresome. It's like waiting for a broken hip to heal. The markets appear to be waiting for some kind of news -- news that never arrives. By the way, is Greece going to make it? I don't think so, but everybody knows that. No shocker there if Greece falls out of the Eurozone.