General Markets: Yes, the U.S. stock indices took it on the chin again this week and things appear to be getting crazier all the time as we head further into 2016. The Nadasq 100 and Nasdaq Composite, the two indices that typically lead in bull and bear markets are strongly saying its bear time for the markets going forward. The Nasdaq 100 and the Nasdaq Composite ended the week down 5.95% and 5.44%, respectively, from whence they began on Monday, and finished with a strong downside flurry of 3.44% and 3.25% on Friday, accentuating the continuing downtrend of 2016. The Biotech sector (NYSE ARCA Biotech), another big leader during this bull market, was down 5.36% for the week and slammed itself into the floor on Friday with a 2.05% decline. These are all foreboding signs, particularly considering this is the second downward spiral in the last six months for the U.S. stock market, which is considered the leading stock market in the world. February is often a weak month for the stock market, so we may have further weakness next week.
The so-called FANG (Facebook, Amazon, Netflix, Google) stocks along with a nosedive by Linkedin on Friday after a poorly received earnings report, led the U.S. markets down this week. These stocks fell 7.25%, 14.46%, 9.85%, 7.99%, and 45.24%, respectively. The four FANG stocks have been primarily responsible for bringing the broader stock indices back from its August swan dive to exceed or approach former highs as recently as late November and early December 2015. These four stocks were about all that was left of the quickly faltering bull market in late 2015. Without these four stocks continuing their relatively strong late 2015 runs, the Nasdaq 100 and Nasdaq Composite have little hope of regaining or approaching their highs. The Biotech sector (IBB) at 256.24, another bull market leader, has shown few signs of strength since its July 2015 highs and is quickly approaching its 200 week moving average at 238.43. The Dow Transportation Index and the Russell 2000 index look terrible as well and both have already broken through to the downside their 200 week moving averages. These latter two indices are already in bear market territory, down 26% and 24% from their highs, made in November 2014 and June 2015, respectively.
The exceedingly thin breadth of the last runup of the U.S. stock market is a mirror image of how thin our overall economy is and how little economic firepower is left in the United States. Back in the early 1970’s, the U.S. stock market was being held up, before a subsequent large fall, by what was then called the “Nifty Fifty” stocks, 50 large cap stocks spread across a wide spectrum of the U.S. economy including manufacturing and other substantial industries. These stocks did not include any primary stocks in the military-industrial complex. Now we are reduced to four stocks that until recently held the stock market up for a short time. These stocks include a company that provides movies and other entertainment fare over the internet, an online retailer that has a history of poor profits, and an online social media outfit that is primarily known for exchanging selfies, chitchat, and making online friends. The internet is an important vehicle for business but we need much more than this, both on and off internet business models to sustain the large U.S. population. Not only large businesses but small and medium sized businesses as well without undue interference and suppression of competition by big government and their cronies. The reduction of the Nifty Fifty to FANG, and only for a very brief time of support to the U.S. stock market at that, shows how weak the U.S. economy has become since the early 1970’s. See the link below to Michael Snyder’s article on 22 signs that the economic turmoil seen in 2016 is only just beginning.
Government is probably the leading industry in the U.S. and since government does not actually produce or create anything (other than a lot of problems for the people), when the once almighty U.S. dollar collapses, the U.S., as a country, does not have anything of real substance to fall back on and start over with. The only positive to all this is as the system continues to fail more and more people, this is forcing people to wake the hell up about how this system really operates, and realize that it is designed to work against the people and not for them. This system is designed for the benefit of a relatively few elite, that include government, big banks, and big corporations but not us. I am not saying that everyone that is wealthy is at fault here, hell I think a lot more people should have the opportunity to become wealthy but it will not happen as this system is designed to prevent that. The statistics of income distribution under this system loudly proclaims just that. Those, who through their own arduous efforts along with a bit of luck who have become successful and wealthy, I applaud. But this system does a lot of evil things to a lot of people to specifically prevent more people from having the opportunity to rise based on their own efforts.
This system does not want nor foster individual independence or prosperity for a greatly larger number of people than now exists. It actively opposes that but does so in a disguised and devious manner through propaganda, indoctrination, lies, secrecy, covert attacks on citizens, and, of course, through printing lots of paper money to make people think they are getting free goodies from the system. Free goodies, from an extremely corrupt and criminal system, has a huge cost to the people, their and their children’s lives. Look around you, what do you see that is becoming more and more evident as each week passes? Unnecessary wars, subversion and total neglect by governments of laws protecting your country and its way of life, social chaos, false flag events to create fear in the citizens of their own country that government and their cronies look to take advantage of, artificially induced sickness to oppress, control, and kill its own citizens, illicit confiscation of your property and rights, and the list goes on.
The government has the latest technology, drugs, chemical agents, bio-weapons, and methods at its disposal to attack, oppress, and control any population it chooses. Not because it’s the right thing to do, but because of the paper dollar being the world’s primary reserve currency that has enabled this governmental monstrosity to build up its before-mentioned arsenal and associated power. Their philosophy is might makes right and it makes for a brutal, mean, and destructive world that is of benefit primarily to the relatively few at the top of this criminally designed pyramid scheme. The general populations are to be used and abused as necessary for the power and benefit of the few in league with one another. Everyone else is expendable.
The good thing about this U.S. economic decline and along with its abusive and murderous military power, is that much of their power over us will diminish. The system, as it now operates is in terminal decline. The U.S. and its vassal states will no longer be in semi-total control of the world, through its primary devices of wars, covert and overt force, and financial bribes of other countries elites. This should allow the people much more freedom to direct their own lives without the smothering interference of their own big government along with its cronies. But this system has created an economic mess and indoctrinated the population to look to government for solutions if not be outright dependent on government. You do not get solutions from big government just big problems. The people will have to find ways, apart from big government proposals and directives, and within themselves and among themselves, to push their way out of the mess that is coming while respecting each other’s rights. Any government is big, whether federal or state, if it is trying to impose its will on you while disregarding your rights and legitimate interests.
The Junk bond market had another bad week and interest rates for the CCC rated issues have reached 20%, a rate last seen during the Lehman debacle in 2008. See Wolf Richter’s article link for additional details on junk bond interest rates below.
Currencies: The U.S. dollar had a sharp decline this week and dropped 1.7% on Wednesday, its biggest one-day decline since March 2015 according to the WSJ. It followed Wednesday’s sharp decline with another significant decline on Thursday. In all, the dollar declined four of five days last week with Friday’s advance probably short covering to lock in the week’s profits before the weekend. After trading in a range since March 2015, this sharp, big move down looks ominous in regards to the future strength of the dollar. The dollar has lost about 97% of its value since 1913, when the Federal Reserve central was created. The May 2014 to March 2015 dollar rally was a strong rally against its long term down trend and current technical as well as fundamental conditions make the likelihood of the dollar to continue its downward descent in concert with its long term trend very likely.
Major parts of the world are prepared to use an alternative currency system that seriously de-emphasizes the importance and use of the U.S. dollar as the world’s primary reserve currency. There is little economic strength underlying the U.S. dollar and its government is hopelessly in debt at levels that can never be repaid. That is why many of its major creditors are dumping U.S. dollars and Treasury securities at a rapid pace over the last year or two and buying into assets or deals that have real value going forward. Low oil prices has only exacerbated this trend as oil producing countries receive fewer dollars in trade and have dumped U.S. dollars and securities to meet budget shortfalls.
As I have mentioned before, China and its currency are poised maintain relative strength against the dollar going forward. Alastair Macleod, Head of Research of GoldMoney fully and eloquently further makes this point in the link to his article below. The Telegraph.UK in an article this week make the point that much emerging market debt is in dollars and that the falling dollar will make the repayment of these dollar loans much easier. The article cites specific companies that have as much as 80% of its debt in dollars and include past Recommendations such as BABA (Alibaba, China online retailer), OGZPY (Russian natural gas company), PBR (Brazilian oil company, this one is a high risk pick, it is still in the midst of serious mismanagement and corruption charges as it is a primarily government owned company (what a surprise)) and LUKOY (Russian Oil Company). This financial loan payoff benefit also supports recent emerging market Recommendations such EWZ (Brazil ETF), BRZU (3x leverage Brazil ETF), RSX (Russian ETF), RUSL (3x leverage Russia ETF) and probably VIP and MBT (Russian telecoms that sport high dividends). The link to the Telegraph.UK article is below. These and the previously mentioned articles were pulled from the Zerohedge and FinancialSurvivalNetwork websites.
Energy: Light sweet crude rose 8% on Wednesday as the dollar dropped sharply but overall continued to consolidate its recent two week run up off the bottom at $27.56 and ended the week down. I would expect some more consolidation in this area but I think oil has further upside from this area in the near future (2-4 weeks). With the U.S. dollar starting to show serious weakness, this bodes well for the prospects of further rises in the energy complex as well as possibly the agricultural commodity complex. Also expect some further consolidation in the solar power sector, specifically for SPWR (Sunpower), FSLR (First Solar), and TAN (Solar ETF).
Precious Metals: Gold has had a nice run up in 2016 but is currently running into its 50 week exponential moving average which has provided insurmountable resistance to it six times before since March, 2014. Each time it ran into this moving average before, the gold price reversed and continued to trade in a downward biased range. I expect the same to occur here over the next couple of weeks. As long as Treasury bonds remain strong, I do not expect any big flights to precious metals.
Recommendations: Consol Energy (CSX) is a natural gas and coal producer. On its recent earnings conference call, it expects to weather the current low price environment without selling any properties/assets and it is free cash flow positive. It still has significant hedges in place that are cushioning the effects of the low prices. Due to the recent numerous bankruptcies in the coal space, it customer base has actually increased in that area as customers look for a reliable supplier. It can be profitable in the natural gas area with a price in the low $2’s and is expecting to get that down to $1.86 in the near future due to further cost efficiencies. I would not be in a hurry to buy here as it has almost doubled in price over the last two weeks. I would not be surprised to see it consolidate recent gains here and possibly provide an opportunity to pick it up at a prices below $8 versus its current price of $9.1.
Interesting Reads This Week: