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Law suit? Porn addict? Divorcing?Seeking investment ideas? Worried about

the world?Posted by : hedgeless_horsemanPost date: 10/06/2014 - 00:34You don't need to go sing at a mega-fellowshipchurch, pay a preacher, or call dial-a-prayer...Whatwould Jesus really do in less than 2500 words.

Supply and Demand Report: 5 OctPosted by: Monetary MetalsPost date: 10/06/2014 - 00:04How much higher can the dollar go? Betting onthe Fed’s paper has been one helluvaspeculation... Read on for the supply anddemand fundamentals of gold and silver.

What Will Trigger The Next Round of theFinancial Crisis?

Posted by: Phoenix Capital...Post date: 10/05/2014 - 17:11Today, we now have a financial system that iseven more leveraged than in 2007… backstoppedby even less high quality collateral. So when thepanic hits, the selling...

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3 Things Worth Thinking AboutSubmitted by Tyler Durden on 10/03/2014 12:51 -0400

Federal Reserve Ford George Soros International Energy Agency Iraq

Market Internals OPEC Reality Recession Reflexivity

0

Submitted by Lance Roberts of STA Wealth Management,

Correction Awakens Sleeping Bears

Since the end of 2012, the S&P 500 has been on an inexhaustiblerise despite rising geopolitical tensions, extremely cold weather andweak economic data. The driver, of course, has been the massiveliquidity inflows from the Federal Reserve that have catapulted themarkets from their previous upward bullish trend into an acceleratedpush. This is shown in the chart below.

However, the recent market correction has taken on a differentflavor with a deterioration in market internals and a narrowing ofleadership.

Walter Murphy noted on Wednesday that:

With both the number of S&P 500 stocks above their 200 daymoving average and on "bullish buy signals" deteriorating since mid-2013, the increasing divergence of prices from the underlyingperformance is cause for concern.

9Like Share

"NYSE declining stocks exceeded winners by 5:1while the up/down volume ratio was bearish by amore robust 11:2 margin. In recent comments, we thought that last week’s breachof the 1978 double-bottom was a warning for lower lows.The importance of that breakdown was brought hometoday for at least four reasons. First, the S&P closedbelow what has been the dominant intermediateuptrend line from the November 2012 low. Second,the percentage of NYSE stocks below their 200-dma isbelow 45% for the 1st time since November 2012. Third,the decline has an impulsive look to it. Finally,intermediate to longer term Coppock oscillators aredeteriorating for a majority of indexes and stocks."

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10-06 7:15: Asos (ASC LN) says FMR LLC holds 5.39% ofvoting rights10-06 7:15: Shell delays UK St. Fergus start and the plantwill be fully...10-06 7:15: Western European Car registrations rose 5.8%in September, according...10-06 7:15: Irish Consumer Confidence (Sep) M/M 92.8 vs.(Prev. 87.1)10-06 7:15: USD/JPY trades in close proximity to 109.00where 2.95bln option...10-06 7:15: London Silver Fix USD 17.02 (Prev. USD 16.97)10-06 7:15: Russia must set acceptable terms for Ukraineon gas, according to...10-06 7:15: Deutsche Wohnen (DWNI GY) improvesfinancing structure and cash flow

10-06 7:45: For these corps, innovation (Infinite QE)10-06 7:44: Fiorina should be pelted with (redd_green)10-06 7:43: The red area is the (Cpiiesf7)10-06 7:43: He may just print more (short screwed)10-06 7:42: The Dow is on a clear path to (wmbz)10-06 7:42: Please Banzai7, not before my (CognitiveDissonance)10-06 7:42: The only thing lamer than, " (JulianAD)10-06 7:41: Not gonna happen. We are (DocinPA)10-06 7:41: Jesus was not a Jew, the (hustler etiquette)10-06 7:41: Thanks for the link RM, and (medium giraffe)

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I have also noted that the market has broken below the acceleratedbullish uptrend, and a normal 38.2% correction would pull the indextowards 1750 currently. While such a decline currently seemsbeyond the grasp of reality, it would actually be a healthy 13%retracement from the peak. However, since such a correction hasnot been witnessed since 2012, it will feel far worse for mostindividuals who have become overly complacent during the market'saccelerated advance.

Portfolio Action: What is missed by the "buy and hold" crowd isthat "portfolio management" is NOT about selling everything andhiding in cash. As investors, our job is "buy low and sell high." Withthe markets showing signs of deterioration on multiple levels, this isprobably a good indication that it is time to prepare to rebalanceportfolios, "trim" winners and "sell losers."

However, with the markets oversold on a very short-term basis it isadvisable not to "panic sell," but use "bounces" to rebalanceportfolios. Yes, this will mean an increased cash weighting in yourportfolio that is earning NOTHING, however, having cash is whatgives you the ability to "buy low" when the current correctionprocess is complete.

Plunging Oil Prices Hit Energy Stocks

The recent spike in the US Dollar has impacted many areas of thecommodity complex but has been particularly nasty to oil prices.There are many issues weighing on oil prices currently from reduceddemand due to globally weak economies, a reduction in drivingmiles, continued improvements in fuel efficiency and a risingsupply/demand imbalance due to the explosion of domestic"fracking."

Recent estimates from of demand growth from OPEC, the U.S.Energy Information Administration (EIA) and the InternationalEnergy Agency (IEA) place demand growth at 900,000 to 1.05million barrels a day in 2014, and rising to around 1.2 million to 1.3million barrels a day in 2015. The problem is that supply growth isprojected to surpass that demand by rising to 1.6 million barrels aday in 2014 and 1.3 million barrels a day in 2015. Most all of thatsupply growth will come from fracking in North Dakota’s Bakken,and the Permian Basin and Eagle Ford plays in Texas.TheDollar Spike And Market Corrections

While fracking has been a boon to U.S. energy stocks the costs ofdrilling wells has been climbing, and the decline rate of productionfrom fracking is extremely steep. This year independent oilproducers will spend roughly $1.50 for every $1.00 of revenue theyget back. Furthermore, it will take roughly 2,500 new wells a yearjust to sustain the output of 1 million barrels a day in the Bakkenshale alone. (As a comparison Iraq can do the same with 60 wells)

If the confluence of the rising dollar and supply/demand imbalancespush oil prices below $85/bbl the profitability of drilling new wellsbecomes much less attractive and existing revenue streams forproducers will deplete fairly rapidly. The poses a significant risk toenergy related investments due the recent deviation in priceperformance from the underlying commodity.

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As shown, the performance of energy stocks has historically beenclosely correlated with the performance of oil prices with theexception of the liquidity driven asset inflations in 2007 and 2012-13.

Portfolio Action: Energy related investments are under pressure byfalling energy prices and the rising dollar. As discussed above withreference to "portfolio management," energy is an area that is ripefor "pruning and weeding" on any bounce. There is much "hope"built into energy stocks currently but there is mounting evidencethat fracking may not be the "nirvana" most are expecting.

U.S. Dollar Spikes And Historical Market Impacts

As I discussed yesterday, the implications to investors of a stronglyrising U.S. dollar is important as it has a negative effect on stockmarket prices. One of the last remaining last remaining footholds ofthe "bulls" has been the strength in corporate profits.

As Sigmund Holmes recently penned similar thoughts:

"With valuations now expensive, interest rates set to riseand yield spreads narrowing as the Fed removesmonetary liquidity, the risks to markets have risensubstantially since the beginning of the year. Thisincrease in risk, as the Federal Reserve extracts supportfrom the markets and economy, is being reflected by thesurge in the dollar as 'safety' is sought. This hasoccurred each time QE has been extracted, and thesurge in the dollar has been historically associated withmarket corrections."

"The dollar also rallied in the [2011] although it didn’treally get started until later in the correction inSeptember and October. This time the dollar has had amajor rally even before the official end of QE. Theend of QE 2 also ushered in the Euro crisis and onceagain, albeit to a lesser degree, we are seeing problemsin Europe. One final similarity is that the economicdata going into the correction was fairly good as itis now. It was only after the correction and theonset of the European problems that US economicdata started to deteriorate. One can’t help but thinkof George Soros’ theory of reflexivity whereby it ismarkets that move the economy rather than the otherway around. We’ll see if this continues to develop in a similar fashionto 2011. I have a sneaky suspicion that it may actuallyturn into a bigger correction. There are a lot of people inthis market who really don’t want to own it and any hintof losses may be enough to send the hedge fund andmutual fund traders to the door in an effort to protect

Wolf Street

Fri, 10/03/2014 -12:56 | 5285177

Portfolio Action: The spike in the U.S. dollar is a drag on U.S.exports that comprise roughly 40% of domestic profits. Again, thereis much "hope" built on sustained growth in U.S. profits as shown inthe chart below. (Read: Analyzing Earnings Q2 2014)

The reality is that the trend is historically unsustainable andeventually will lead to a mean-reverting event in asset pricesas fantasy collides with reality. The loss of capital, when itoccurs, will be much greater than most are currently capable ofcomprehending. Again, this why a disciplined process of "portfoliomanagement" is necessary to protect capital against suchcatastrophic losses.

Final Note: I heard an advisor say recently that major stockmarket declines only happens during recessions. While he is correct,here is something worth pondering: "Did a recession cause thecorrection, or did the correction cause the recession?"

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William Finn

The Perilous Parableof Saltwater

A scenic ridge running South to North, sports a hiking trailrunning the length of it. Alongside the ridge, there is ocean tothe left, and to the right, a bubbling freshwater creek. At the topof the ridge is a vista from which both creek and ocean can beseen. The ocean can be accessed through an easy walk down acleared path and the brook, while accessible has no path. Thosehikers wishing to get to the brook must climb down an un-cleared, rocky hillside – not difficult, but not easy either.

Two men sit at the vista and play cards all day long. Whenthirsty they would grab a passing hiker and pay him $1 to go getthem a bucket of freshwater to drink. For years, this systemworked for both cardplayer and hiker.

One day, one of the card players surprised the other and said,“My uncle Ben died and left me $4 trillion dollars.

The other said, “That is great. What are you going to do with it?”

the old year end bonus."

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Fri,10/03/2014 -13:22 |5285297

Fri,10/03/2014- 13:24 |5285308

Fri,10/03/2014- 13:31 |5285333

Fri,10/03/2014 -13:34 |5285353

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Fri, 10/03/2014 -12:55 | 5285182

The Heir said, “See this ravine behind me? I am going to fill it upwith saltwater. I have always wanted a saltwater pond.”

To the very next hiker the Heir saw, he offered the followingdeal: For every bucket of saltwater the hiker would bring up thehill, the Heir would pay $5.

The hiker was ecstatic. He brought up a bucket and was paid$5. He ran down the hill and got another one, and was paid $5again. The next day the hiker brought two buckets, and was paidfor each bucket he could bring up and dump in the ravine.

The other card player was annoyed because when he handed thehiker $1 for freshwater the hiker laughed at him. “Saltwater iseasier to get, and I get $5 for it. If you want freshwater, youhave to pay $6.”

The hiker continued to exploit this arrangement. Soon he wasbringing friends to the hill to gather saltwater all day long anddump it in the ravine, making an aggregate profit on eachbucket. It was not long before word spread, and hundreds ofpeople converged on the ridge to make their $5. Soon, cottageindustries sprouted up…fresh water for the workers, temporaryhousing, food sales. Next, the formerly beautiful ridge sawdevelopment…first stairs to make the water easier to bring up. Then a pipeline. And very shortly, because the heir was paying$5 for worthless saltwater, an entire economy developed at thevista.

A bearded, Nobel Prize winning economist saw this and remarkedon the health of this vibrant, hillside economy. Transactions infreshwater proved that the value of all water had gone up. Unemployment was falling. Buildings were constructed. Moneywas multiplying. All was good.

Until one day, the heir looked at his ravine and saw that it wasfull. If any more saltwater were dumped in, the vista would floodand he and his friend would have no place to play cards. So heabruptly stopped buying worthless saltwater.

My ten year old son figured out what happened next.

RaceToTheBottom

Well, who wonthe card games?

101 years and c...

the recession(started in

Q4, 2007) started thecorrection. thecorrection became a crash that created the depression(and the need for the Fed to print over $3.5 TRILLION topretend we're not in depression).

William Finn

The one with$4T.

all-priced-in

Governmentinstalled a stiff taxon rich heir so they

could keep paying peopleto do nothing?

William Finn

Dupe. Sorry

Soul Glow

Yellen smokes DMT.

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Fri, 10/03/2014 -12:59 | 5285186

Fri, 10/03/2014 -12:58 | 5285190

Fri, 10/03/2014 -12:58 | 5285192

Fri,10/03/2014 -13:55 |5285447

Fri, 10/03/2014 -12:59 | 5285201

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Fri,10/03/2014 -13:10 |5285243

Fri,10/03/2014- 13:15 |5285263

Fri,

Dr. Engali

"I heard an advisorsay recently that major stock market declines onlyhappens during recessions. While he is correct, here is

something worth pondering"

WTF don't these guys get about he words "policy tool"? AndBTW, we are in a depression butt munch.

firstdivision

Only two thingskeeping the SPX where its at:

1) Smashing Vol https://www.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=Logarithmic&chdeh=0&chfdeh=0&chdet=1412366400000&chddm=1173&chls=IntervalBasedLine&cmpto=NASDAQ:ZIV;NYSEARCA:SPY&cmptdms=0;0&q=NASDAQ:XIV&ntsp=1&ei=wtEuVKGYLIebrAHP6oDYDQ

2) Squeezing the shorts

TheRideNeverEnds

Recessions, just like10% corrections, are a thing of the past.

You cannot enter a recession if you are already in a depression.

Winston Churchill

1933 and 1937 ringany bells ?

It must be blissful beingas ignorant as you.

Seasmoke

I am done pondering.Fuck it.

Doubleguns

I'm thinking thecorrect answer is.....THE FUCKING BANKERS!!!

KnuckleDragger-X

It's easy to blameit all on thebankers but they

have their enablers andwe the people not only elect them but encourage them aslong we get our (tiny) cut. The only good thing is when thisall goes to hell the freeloaders will suffer the the worst.Unfortunately the people with a clue will get a free trip to hellwith them.

Doubleguns

I elected noone at theFED. Maybe

changing that wouldmake a difference. Nah folks would just vote for the onethat prints them the most money and has the biggesthelecopter.

KnuckleDragger-

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10/03/2014- 13:38 |5285364

Fri, 10/03/2014 -13:13 | 5285251

Fri, 10/03/2014 -15:36 | 5286010

Fri, 10/03/2014 -15:48 | 5286070

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X

The FEDexists onlybecause

the government created it and allow's it to continue.the representitives that were elected by the peoplearen't even interested in something like an audit andfor very greedy personal reasons. But don't worry, theworst of them will be re-eleted to help us continuedown the path.

SheepDog-One

Banksters, clingingdesperately to a dead system.

hawaiian waverider

Also, recessions arenoted to start before people "feel" they are in one. So,

corrections can happen when things "feel" good and later it canbe shown, as it has in the past, that we were in a recessionalready.

limacon

The correction causedthe recession .

This is because the correction happens slowly . The smart moneypulls out ahead of time carefully so as to disturb the price as littleas possible.

When the pack wakes up and smells the coffee , the rush for theexit causes the major , visible correction .

The recession then occurs as capital and confidence dries up .

The coming correction is well underway . The major players inhedge funds , etc have departed , leaving the Fed to play themusic box to a bunch of foolish children playing musical chairswith widow-and orphan money .

Everybody is leveraged to the hilt and the gamesmaster haslocked the doors shut by removing liquidity .

Raoul_Luke

We've been inrecession since 2000. If you back out all the deficitspending since then and use a proper GDP deflator (not

that crock of crap the BEA uses) we're definitely behind for thedecade and a half Keynesian bacchanal we've "enjoyed" underBush/Obama. The crash didn't CAUSE that...

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