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Quote of the Day

Thursday, May 10, 2012

May 10, 2012 -- I said I was going to ease up and make the sites Tuesdays and Thursdays short-short. Well, here goes for what I hope will be short Thursday.

 

Yesterday I went to Costco for the first time -- to buy a pair of eye glasses. The place is amazing. It's built like an aircraft hanger or dome, severe, lots of room, high ceilings, no frills at all. At each long aisle there was some one handing out free food samples. I ended up eating a full free dinner, and it was good at that. I bought three pairs of eye glasses with frames for $375, about one third of what it would cost me at a La Jolla oculist.

 

Costco had just about every thing you can think of for modern living -- at bargain prices -- vacation trips, vacuum cleaners, pots and pans, deck furniture, awnings, flowers. I wondered whether this is the real trend of the future. Membership to Costco is fifty bucks a year for two people. Why would a person shop any place else? The only problem is quantity. Everything for sale from razor blades to Ensure to T-shirts to frozen burgers comes in quantities -- you can't get out of the place for less than three hundred bucks. Take a trip to Costco and you'll get an idea of how much sheer "stuff" is being manufactured in the world today. Who the hell is going to use it all? Hopefully 1.3 billion Chinese will use it.

 

Gold continues to be a maddening mystery. Yesterday, to the consternation of gold shorts, Dec. gold closed below 1600 (it did it again today). I'm increasingly convinced that the only safe way to own gold is in bullion coin form. In that way, you've got your gold and you're not tempted to trade it. You hold onto it, and you take it to your grave -- or give it to your kids or your sweetie.

 

In that way, you own a position in gold (the size of which is up to you) and you forget about it. It's like a house that you like and that you own free and clear. You don't call your real estate agent every week to ask what your house is worth. You bought it, you like it, it's a source of pleasure, and you don't stay awake nights worrying about it.

 

Lately, I hear a lot of gold-naysayers boasting that "I own gold for insurance purposes only, although I'm certainly NOT a gold-bug." Of course, the same people feel happy as a lark when their gold goes up in price.

 

I have subscribers who loaded up on bullion ten and even 25 years ago. They write to tell me that those purchases have changed their lives, although they never would have believed it when they were buying their gold at rock-bottom prices.

 

"Buy your gold and look away. Your buys will look brilliant some other day."

 

Hey, I don't like what I see on the Lowry's statistics. Buying Power (demands) has been slipping, and Selling Pressure (supply) has been creeping higher. The negative spread between the two has widened from a recent 130 to yesterday's 145. In the meantime my PTI, after forming a double top, has failed to go to a new high. Yesterday my PTI was 5 bullish by a mere 5 points.

 

Verdict -- be OUT of all stocks and be very patient. I don't like the undertone of this market one bit; I think the stock market is under subtle and quiet distribution. Holding any stocks over time will be a loser -- so it's simple -- don't hold them; stay in cash and gold coins until I think of something better. I also like the Permanent Portfolio PRPFX, which is a reasonable place to park your assets.

 

The market has been quiet for a while. I think something big is coming up, and I don't think it will be good. Caution is the watchword now. This is the quiet before the storm. I note that the VIX (the "fear index") has been quietly and slowly rising to where it is 19.55 today. The chart below of the VIX shows the VIX climbing above its 50-day moving average. MACD is giving a "buy" signal.

 

  

 

Very soon the big Facebook IPO will hit the market. Thousands of retail-public amateurs want a few shares, but nobody is certain of getting what they want. Faye put me on Facebook. I looked it over and decided that it was too much work to keep it up. I could spend many hours every day on the damn thing, and I would be wasting my time. I've never looked at Facebook again

 

I always thought that anything that would bring people together would work. I think most people in the world suffer from fear and loneliness, and maybe that's the secret of Facebook's amazing success. But in the end, boredom may kill it.

 

At least it's a success for the Zuck who will walk away with $18 billion worth of Facebook stock if the IPO is a success.

 

Funny, when I first started in this business I thought in terms hundreds, then thousands, then (thanks to the Fed's easy printing habit) millions, and now, God help us -- billions. When talking about federal debt today, you have to choke in multiples of trillions. Seriously, it's getting kind of insane. I call it math perverted by steady inflation.

 

I see Obama has finally OK'd same-sex marriage. This leaves Romney stranded as an old fashioned fuddy-duddy. The youngsters of today are far more liberal than their parents ever were. Today 15% of marriages are interracial.

 

My opinion -- leave people alone as long as they are not hurting anyone. If two girls or boys love each other and they want to get married, it's none of my damn business. They'll only live once. Let them live in peace during their one journey on earth. They're not hurting me, and they're not offending me. I got all the offence I'll ever need in WWII. Talk about offence! What's more offensive than war? And millions of people are involved in a war. Offence -- A man with one arm and one leg -- that's an offence; it's an offence against humanity and civilization.

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I see that Lichtenstein's "Sleeping Girl" sold at auction for $45 million. I knew Lichtenstein when he was studying at Columbia. At the time, I don't think he had ten grand, but those art auctions are off the charts (are there too many billionaires on earth today?).

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"What, then, would the price of oil be if since 2002 the dollar had been as good as gold? The price would be down $6 to about $20 a barrel, and the price of gasoline would be near a buck a gallon. The debauch of the dollar also erodes our prosperity and our security. ...The basic reason for higher energy prices is being overlooked. Oil prices are up because the value of the dollar is down." Charles Kadlec, Forbres columnist.

 

TODAY'S MARKET ACTION:

 

My PTI was up 2 at 6383. The moving average is 6376, so my PTI is bullish by 7.

 

The Dow was up 19.98 to 12855.04.

 

Transports were down 25.52 to 5133.81.

 

Utilities were up 4.78 to 471.79.

 

NASDAQ was down 1.07 to 2933.64.

 

S&P 500 was up 3.41 to 1357.99.

 

There were 1,894 advances and 1,127 declines on the NYSE.

 

There were 83 new highs and 29 new lows.

 

Total Volume on the NYSE and associated exchanges was 3.6 billion.

 

Bonds: Yield on the 10 year T-note was 1.888. Yield on the long T-bond was 3.058. Yield of the 91 day T-bill was 0.096.

 

Dollar Index was up 0.062 at 80.14. Euro was up 0.05 at 129.53. Yen was down 0.36 at 125.18. Currency Prices as of 1 PM Pacific Time.

June gold was up 1.30 to 1595.50. July silver was down 0.063 to 29.18.

 

June light crude was up 0.27 to 97.08.

 

My Most Active Stocks Index was up 4 at 264.

 

The Big Money Breadth Index was up 4 at 1008.

 

GDX was up 0.07 at 43.09.

 

HUI was up 1.33 at 411.25.

 

CRB Commodity Index was down 0.24 at 294.59.

 

The VIX was down 1.25 at 18.83.

 

Permanent Portfolio Fund (PRPFX) was down 0.19 to 47.40 (previous day closing). YTD Return: 2.84%

 

Late Notes -- After fluttering around all session, what did we end up with? The Dow ended up about a half quarter of a percent and the Trannies were down. And only 83 new highs on the NYSE. So what's the matter with this reluctant market? The world-wide forces of slow, grinding deflation is the matter (masked by very temporary inflation, courtesy of the Fed). More on deflation on tomorrow's site.

 

Happy landings to all my beloved subscribers,

 

Russell