The Fed & the US Dollar (great chart)...
Interesting Article on "interventionism" and a great LT chart on the US Dollar.
gold-eagle.com
A coming lower, softer US dollar & higher price of Gold is one of the easiest trades we'll ever get brought to us imho.
After Cisco reports - we have a (trading) Rally-Window of Opportunity between Q1 & Q2 Tech reporting for not just Tech, but the Oilpatch and a broad market rally within a still Bear Market.
Valuation Multiple compression & the return to the mean historic valuation multiple is what this market is all about.
We keep going in that direction & no one is willing to look past the end of their nose, or past the bottom of each new leg down during the tech implosion and to look out to where historic mean valuation multiples (let alone true Bear Market valautions) are going to take us.
Additional "Bear Market" catalysts are the "unknown" stress fractures that the collapse of a historic, reckless credit bubble may bring, along with a continued Energy Crisis and a King Dollar that is unsustainable & is a recessionary overhang to the US Manufacturing Sector.
Throw $2 Summer gasoline into an environment of continued US Corporate Cutbacks & Layoffs and then let Tech Companies report yet lowered guidance again in Q2 & Q3 and a still lack of visibility concerning a turnaround and that historic & classic final Bear Market stage - CAPITULATION; to where no one wants stocks at any price - to where they just want out, to where bottom fishers have become not just endangered species; but are allready extinct & then and only then; will we see a bottom...
DOW 10,000 is NOT a bear market, is not a return to sane valuation multiples and we are NOT even close to putting this Bear to bed imho.
PS: The SI Oilpatch Thread Sentiment Indicator Meter - called the "exact" trading bottom once again... to the day - whodathunkit ?
People think I'm being sarcastic about that indicator; I am not - I am 110% serious about its accuracy & all you have to do is glance over under the porch/over there... and you'll see the "new paradigm" pom-poms allready broken out again & the return of the "10 Foot Tall & Bulletproof" mantra ...
They'll never learn.
Concept #1 of the Oilpatch being a cyclical sector first & foremost and that the 7th deadly sin to cyclical investing & trading is that the minute you begin to mouth - "this time it's different", or the "new paradigm" concept, or to label a cycle as "10 Ft Tall & Bulletproof" and most importantly; if you begin to trade them as growth stocks; you're about to be humbled... and they were; hell, they have been twice in 4 mos; "max margined into a collapse to OSX 94 and getting whipsawed here from OSX 135 to 104 yet again. Many of the Nat Gas E&P's are $15-$20 off their highs and aren't EVER coming back to those levels - yet; they see this as just a pullback ?!?!? ... you have to wonder if these clowns would sell XTO at $50, or if they'd start to ask - why can't the NG stocks get Tech-like multiples once it hit $50 & raise their targets to triple digits (VBG)?
Oilpatch valuations are high; very high - above market multiples and this is, was and will allways be - a Cyclical Sector. Multiples begin to contract in late cycle & the mistake the chihuahua-crowd allways make, is they look out to peak eps numbers & want to apply the same early/mid cycle valuation multiples to those numbers - wrong. Once the peak earnings appear on the horizon - so does cycle rollover & multiple compression in late cycle. The Chihuahua-Crowd wants to wait for the arrival & the rollover of peak earnings to sell & take profits - that never works; never has & never will...
We've got a slowing global economy & the Chihuahua's with Face Paint - seem to have forgotten the little effect that the "Asian Contagian" had on the last Oilpatch cycle.
Yes; $28 Oil & $4 Nat Gas is historically very, very high for the E&P's; but the peak for combined commodity price levels, eps & cfps for the E&P's has allready come & gone - and given this is a cyclical sector; why would anyone pay more for, or take these stocks back to old highs; let alone new highs - into lower commodity prices, into lower 2002 eps & cfps numbers than 2001 and most importantly; into a slowing global economy & a still Bear Market environment ? The Chihuahua's aren't even smart enough to exit the early cycle & commodity price pureplays and rotate to the later cycle plays. They're still waiting for APA APC & XTO to get an EPS multiple of 15-20 on forward earnings... it AINT happening folks... Think about what multiple 6-8 x cfps at $5 Nat Gas & $30 Oil is at $2.75ish Nat Gas & $21 Oil for a moment... given the cyclical nature to not just these stocks, but commodity prices & given the global economic slowdown - rethink the "real" valuation multiples based on historic mean Oil & Gas Prices that the E&P's were and are selling for...
In 1980 when Gold was $800 per oz; would you have wanted to pay the same upper range of PE multiples for Gold stocks at $800 - given the prior historic average price trend for the commodity; as you would at $400, or $300 per oz ?
Why would anyone with a clue; want to pay the upper valuation multiple range for Oilpatch stocks - late cycle, into a slowing global economy, within a US Bear Market and atop the crest of a historic commodity price peak/blip ?
Hello - common sense & reality....
The next "Big & Easy Money" in the Oilpatch is going to be made on the short side... it allready is in E&P's and it soon will be on the Driller & Service side... sooner, than anyone anticipates... and for the above reasons - because the return to historically normal commodity prices is a when, not if proposition and "new paradigms" are selling & profit taking opps - not buy & hold blue sky opps... the Chihuahua's should have just learned that lesson in Tech - but, they obviously didn't; they're transfering the same losing strategies to a cyclical sector - sheer insantity...
They'll never get it - it's human emotion to see the upside, to ignore risk; to ride the euphoria train, to read the analyst drivel & valuation models and to believe what you want to hear and ignore what you don't want to hear. Greed is a powerfull emotion and risk hasn't existed in this market for nearly a decade.
I guess "some" of us, should continue to be thankfull that the "Chihuahua's" not only exist; but that publish daily takes on their market psyche on a public forum & allow "us" to use it as such a great contrarian trading indicator (VBG)...
... just watch the "Chihuahua Meter" for the next - "Big & Easy Money" Trade in the patch - it's coming, it's coming like a freight train & they won't see it, or hear it... but; they'll sure as hell "FEEL" it ~ |
