Archive for June, 2009

Interesting Oposing Opinions of Global Warming/Cap & Trade (Pt 2)

Monday, June 29th, 2009

Battleflag on ER

As the battle of opinion progresses (hence the video from ER featuring the song Battleflag – one of the moments I remember most about the show that so effectively demonstrates the use of music with drama) on both global warming and Cap & Trade, I thought I’d give you the right’s position in part 2 of this blog debate (the earlier post was the left’s position from Paul Krugman).

In this opinion piece, Investor’s Business Daily sites an EPA study that they did not release publicly that provides evidence that Cap & Trade is not necessary from an environmental standpoint. You can weigh Krugman’s opinion against this piece to help you decide in this most-likely-fait acopli (pardon my French, as they say). Just remember, both are the opinions of the writers and you should not get upset by one or the other.

Mark

Carbongate

By INVESTOR’S BUSINESS DAILY | Posted Friday, June 26, 2009 4:20 PM PT

Climate Change: A suppressed EPA study says old U.N. data ignore the decline in global temperatures and other inconvenient truths. Was the report kept under wraps to influence the vote on the cap-and-trade bill?
This was supposed to be the most transparent administration ever. Yet as the House of Representatives prepared to vote on the Waxman-Markey bill, the largest tax increase in U.S. history on 100% of Americans, an attempt was made to suppress a study shredding supporters’ arguments.

On Friday, the day of the vote, the Competitive Enterprise Institute said it was releasing “an internal study on climate science which was suppressed by the Environmental Protection Agency.”

In the release, the institute’s Richard Morrison said “internal EPA e-mail messages, released by CEI earlier in the week, indicate that the report was kept under wraps and its author silenced because of pressure to support the administration’s agenda of regulating carbon dioxide.”

Reading the report, available on the CEI Web site, we find this “endangerment analysis” contains such interesting items as: “Given the downward trend in temperatures since 1998 (which some think will continue until at least 2030), there is no particular reason to rush into decisions based on a scientific hypothesis that does not appear to explain most of the available data.”

What the report says is that the EPA, by adopting the United Nations’ 2007 “Fourth Assessment” report, is relying on outdated research by its Intergovernmental Panel on Climate Change (IPCC). The research, it says, is “at best three years out of date in a rapidly changing field” and ignores the latest scientific findings.

Besides noting the decline in temperatures as CO2 levels have increased, the draft report says the “consensus” on storm frequency and intensity is now “much more neutral.”

Then there’s one of Al Gore’s grim fairy tales — the melting of the Greenland ice sheet and glaciers the size of Tennessee roaming the North Atlantic. “The idea that warming temperatures will cause Greenland to rapidly shed its ice has been greatly diminished by new results indicating little evidence for operations of such processes,” the report says.

Little evidence? Outdated U.N. research? No reason to rush? This is not what the Obama administration and House Speaker Nancy Pelosi were telling us when they were rushing to force a Friday vote on Waxman-Markey. We were given the impression that unless we passed this cap-and-tax fiasco, polar bears would be extinct by the Fourth of July.

We have noted frequently the significance of solar activity on earth’s climate and history. This EPA draft report not only confirms our reporting but the brazen incompetence of those “experts” that have been prophesying planetary apocalypse.

“A new 2009 paper by Scafetta and West,” the report says, “suggests that the IPCC used faulty solar data in dismissing the direct effect of solar variability on global temperatures. Their report suggests that solar variability could account for up to 68% of the increase in Earth’s global temperatures.”

The report was the product of Alan Carlin, senior operations research analyst at the EPA’s National Center for Environmental Economics (NCEE). He’s been with the EPA for 38 years but now has been taken off all climate-related work. He is convinced that actual climate observations do not match climate change theories and that only the politics, not the science, has been settled.

Thomas Fuller, environmental policy blogger with the San Francisco Examiner, wrote Thursday in a story developed in conjunction with Anthony Watts’ Web site wattsupwiththat.com: “A source inside the Environmental Protection Agency confirmed many of the claims made by analyst Alan Carlin, the economist/physicist who yesterday went public with accusations that science was being ignored in evaluating the danger of CO2.”

All this is particularly interesting because of the charges by Al Gore, NASA’s James Hansen and others that the Bush administration and energy companies actively suppressed the truth about climate change.

One of the e-mails unearthed by CEI was dated March 12, from Al McGartland, office director at NCEE, forbidding Carlin from speaking to anyone outside NCEE on endangerment issues such as those in his suppressed report.

Carlin replied on March 16, requesting that his study be forwarded to EPA’s Office of Air and Radiation, which directs EPA’s climate change program. Carlin points out the peer-reviewed references in his study and points out that the new studies “explain much of the observational data that have been collected which cannot be explained by the IPCC models.”

For saying the climate change emperors had no clothes, Carlin was told March 17: “The administrator and the administration have decided to move forward on endangerment, and your comments do not help the legal or policy case for this decision. . . . I can only see one impact of your comments given where we are in the process, and that would be a very negative impact on our office.”

In other words, the administration and Congress had their collective minds made up and didn’t want to be confused with the facts. They certainly didn’t want any inconvenient truths coming out of their own Environmental Protection Agency, the one that wants to regulate everything from your lawn mower to bovine emissions and which says the product of your respiration and ours, carbon dioxide, is a dangerous pollutant and not the basis for all life on earth.

The problem the warm-mongers have is they now are in a position of telling the American people, who are you going to believe — us or your own lying eyes? Forget the snow in Malibu, the record cold winters. Forget that temperatures have dropped for a decade.

In April, President Obama declared that “the days of science taking a back seat to ideology are over.” Apparently not, for as he spoke those very words his administration was suppressing science to advance a very pernicious ideology.

Interesting Oposing Opinions of Global Warming/Cap & Trade (Pt 1)

Monday, June 29th, 2009

Asia: \"Heat of the Moment\"

I attended the Asia concert back in ’82 when this song was big. Cap & Trade certainly qualifies as the heat of the moment, so I thought you might like this blast from the past.

Lets give the first shot in the opinion derby to Nobel Prize winner Paul Krugman, a supporter of Cap & Trade and the left’s position on global warming. In the article, I think he does a disservice to his position by naming himself arbiter of treason, but that is just an aside.

Hope you enjoy this side of the debate as well as the video.

Mark

June 29, 2009
Op-Ed Columnist, New York Times
Betraying the Planet
By PAUL KRUGMAN

So the House passed the Waxman-Markey climate-change bill. In political terms, it was a remarkable achievement.

But 212 representatives voted no. A handful of these no votes came from representatives who considered the bill too weak, but most rejected the bill because they rejected the whole notion that we have to do something about greenhouse gases.

And as I watched the deniers make their arguments, I couldn’t help thinking that I was watching a form of treason — treason against the planet.

To fully appreciate the irresponsibility and immorality of climate-change denial, you need to know about the grim turn taken by the latest climate research.

The fact is that the planet is changing faster than even pessimists expected: ice caps are shrinking, arid zones spreading, at a terrifying rate. And according to a number of recent studies, catastrophe — a rise in temperature so large as to be almost unthinkable — can no longer be considered a mere possibility. It is, instead, the most likely outcome if we continue along our present course.

Thus researchers at M.I.T., who were previously predicting a temperature rise of a little more than 4 degrees by the end of this century, are now predicting a rise of more than 9 degrees. Why? Global greenhouse gas emissions are rising faster than expected; some mitigating factors, like absorption of carbon dioxide by the oceans, are turning out to be weaker than hoped; and there’s growing evidence that climate change is self-reinforcing — that, for example, rising temperatures will cause some arctic tundra to defrost, releasing even more carbon dioxide into the atmosphere.

Temperature increases on the scale predicted by the M.I.T. researchers and others would create huge disruptions in our lives and our economy. As a recent authoritative U.S. government report points out, by the end of this century New Hampshire may well have the climate of North Carolina today, Illinois may have the climate of East Texas, and across the country extreme, deadly heat waves — the kind that traditionally occur only once in a generation — may become annual or biannual events.

In other words, we’re facing a clear and present danger to our way of life, perhaps even to civilization itself. How can anyone justify failing to act?

Well, sometimes even the most authoritative analyses get things wrong. And if dissenting opinion-makers and politicians based their dissent on hard work and hard thinking — if they had carefully studied the issue, consulted with experts and concluded that the overwhelming scientific consensus was misguided — they could at least claim to be acting responsibly.

But if you watched the debate on Friday, you didn’t see people who’ve thought hard about a crucial issue, and are trying to do the right thing. What you saw, instead, were people who show no sign of being interested in the truth. They don’t like the political and policy implications of climate change, so they’ve decided not to believe in it — and they’ll grab any argument, no matter how disreputable, that feeds their denial.

Indeed, if there was a defining moment in Friday’s debate, it was the declaration by Representative Paul Broun of Georgia that climate change is nothing but a “hoax” that has been “perpetrated out of the scientific community.” I’d call this a crazy conspiracy theory, but doing so would actually be unfair to crazy conspiracy theorists. After all, to believe that global warming is a hoax you have to believe in a vast cabal consisting of thousands of scientists — a cabal so powerful that it has managed to create false records on everything from global temperatures to Arctic sea ice.

Yet Mr. Broun’s declaration was met with applause.

Given this contempt for hard science, I’m almost reluctant to mention the deniers’ dishonesty on matters economic. But in addition to rejecting climate science, the opponents of the climate bill made a point of misrepresenting the results of studies of the bill’s economic impact, which all suggest that the cost will be relatively low.

Still, is it fair to call climate denial a form of treason? Isn’t it politics as usual?

Yes, it is — and that’s why it’s unforgivable.

Do you remember the days when Bush administration officials claimed that terrorism posed an “existential threat” to America, a threat in whose face normal rules no longer applied? That was hyperbole — but the existential threat from climate change is all too real.

Yet the deniers are choosing, willfully, to ignore that threat, placing future generations of Americans in grave danger, simply because it’s in their political interest to pretend that there’s nothing to worry about. If that’s not betrayal, I don’t know what is.

Market Moving in Range

Monday, June 29th, 2009

The Cars: \"Moving in Stereo\"

When I decided to write about the market moving within the range we’ve noted here over the past few weeks, The Cars song Moving in Stereo flew threw my head. I know many of you reading this weren’t born in 1978, but that was smack dab in the middle of High School for me, so I remember it well.

At the link above is a live version of the song for those of you who are too young to remember it or haven’t enjoyed it in a while. I think I’ll drop the CD into the player in my car for the drive home – good Summer evening cruising music!

Anyway, I’ve update our favorite chart. You can see that we tested the support at the 200-day moving average and it held. We are now moving back toward the 950 resistance level. Given that it is quarter-end of a holiday shortened week, it is possible we could hit that resistance or even break through it. However, we need some catalyst to move this market up to the 1050 level – that is what I am working on this week – trying to figure out if there is a catalyst or whether we are going to be in a range-bound correction for a few more weeks. Corrections serve to work off overbought situations and they come in the form of a price correction or a passage of time within a range. We are surely in the latter.

spx-2009-06-29

Enjoy the video and I’ll keep you apprised of the markets movements (in stereo or otherwise).

Mark

Gold Entering New Uptrend?

Thursday, June 25th, 2009

gld

As readers of this blog and clients of my Wealth Management business know, we have been bullish on gold for some time. We’ve ridden it up to 1,000 and back down a few times as I believe we will break out at some point in a strong move up to our target of 1300 (1000 previous high less 700 previous low = 300, add 300 to previous high of 1000 for 1300 target).

I do not know if the current break above the downtrend will break through the 1000 resistance level we’ve bumped up against roughly 4 times in the last 15 months, but I thought I’d share the chart of the GLD exchange traded fund. You can see that we have broken above the pink downtrend line I’ve drawn and we have broken above both moving average resistance lines.

Additionally, you can see in the lower section of the chart that GLD has started to be under accumulation – money flowing into something always pushes the price up at some point.

This has the potential to be the story of the Summer if the rest of the market is range bound. Or, it could just be a head-fake like the previous 4 attempts to break through 1000. Two things are common from a historic perspective: stock prices that bump up against resistance several times then break through tend to behave like coiled springs, and commodity producing companies tend to move with more velocity than the movements of the underlying commodities. So if history is a guide, when gold breaks through 1000 and moves up to 1300 (a 30% move), the likelihood is that the miners will have a greater than 30% move up in price.

Keep an eye on the price of gold. It could make you some money.

Mark

S&P 500 Index: 50-day Moving Avg Crosses 200-Day

Wednesday, June 24th, 2009

spx-2009-06-24-2

Well, its a pretty big day in the market. You can see that on the far right side of the graph the 50-day moving average has crossed back above the 200 day moving average. This is the first time since late 2007 that the 50-day is above the 200-day and that brings into question why is it important.

Historically, investors have believed that if the 50-day is above the 200-day moving average, this is a bull market buy signal. Once people start to notice this, they will generally put money into the market believing that they are in on the beginning of a new bull market ahead of the crowd. The 200-day moving average, instead of being overhead resistance to rising prices turns into support against falling prices.

Anecdotally, in my years of investing and watching this sort of thing, I believe that as long as the 200-day moving average is falling, you do not have a new bull market. We certainly could be in for a continuation of the rally, but a falling 200-day moving average line is weak support at best. Granted, having the 50 above the 200 is better than the flip side, until the 200 starts rising along with the 50, the intermediate term trend for the market is still down.

As we move into month-end/quarter-end, it is common to see the markets rally as fund managers make trades to own the hottest stocks for their client reports. My best hypothesis is that we get additional days of the 50 line increasing its upward movement above the 200 line. After that, we’ll have to reevaluate.

Some of our stop losses have hit (GE and Caterpillar) and some of our stink bid buys have hit (Bank of America and Monsanto).

I think that:

1. as long as the Fed keeps monetary policy easy, the stock market will have an over-riding macroeconomic stimulus that will keep a floor under stock prices and keep them moving in a recovery direction (albeit with some painful sell-offs and corrections within this bear market rally); and

2. with all of the money on the sidelines from money managers that did not invest in early March when we did, we have people ready to “buy the dips” that will help sustain the bear market rally up to the 1050 level on the S&P 500 Index (see my earlier posts with the chart showing and explaining this level).

dynamic-yield-curve

The chart above comes from my favorite charting website to which I subscribe: StockCharts. They drew this chart with a skateboarder on it to illustrate the steep nature of the current yield curve which indicates that the Fed is being quite stimulative. I thought it might help to give you a visual on point 1 above.

Mark

Trading Range Holds Firm

Friday, June 19th, 2009

spx-with-fib-2009-06-19

Here is the chart I’ve shown several times updated for current prices. You can see that we are still range-bound between the 200 day moving average and 950 on the S&P 500 Index.

The various sectors are rotating within the range – those that were sold off a few days ago are rallying today. Unfortunately, we won’t know whether the next stop for the broader market is 850 or 1050 until we break out of the range.

As a strategy, we are reviewing all equity holdings from a fundamental basis and any that are weaker than the rest or that are more late cycle recovery stocks are candidates for cash. Many of these have risen significantly since March 9th, but as the market gets closer to fairly valued they could top out or fall as stronger or more timely companies move ahead.

As the weekend unfolds and my normal reviews of the markets and our holdings get underway, I will keep you informed if I see anything of note. Otherwise, you can hum the theme to “Smokey and the Bandit” inserting the worlds “Range Bound and Down” and back up again.

I am headed to a visitation later this afternoon for my friends Mary Ann & Mike’s Father, then attending the Library Foundation Garden Party to thank donors to the annual and capital campaigns – a busy Friday evening here in Champaign.

Have a nice weekend!

Mark

Market Ready to Test 200 Day MA Support

Tuesday, June 16th, 2009

sp-with-fib1

Well, we remained above support at 908 today (the 200 day moving average) but we are definitely in turmoil. Part of this turmoil is that we are in options expiration week and it always presents some volatile moves in the averages.

What can we expect? We very well could just churn in the trading range delineated by the 200-day moving average on the downside and 950 on the upside. However, the breadth index is showing that the short-term direction of the market is likely down.

nyad-breadth-index

Given that, we could very well see the market pull back to the 850 level on the S&P 500 index. If you look at the chart at the top of the page, you will see that I’ve drawn a box around a few days of consolidation in the 850 area. If we break the 908 level and close below it, we could easily see another 5% pull back in the averages to that 850 level.

However, since its options expiration week, anything can happen. All of the monetary stimulus in the economy from the Fed (who engaged in further Quantitative Easing today by buying another $6.4 Billion in treasury notes) does matter and will provide a cushion against the downside. At this point, I think the correction will be subdued – that changes IF we have news of a worsening recession instead of a recession that is nearing the end. Until that happens, we’ll continue to invest on Bernankes side.

Mark

S&P Pattern Continues In Spite of Sell-off

Monday, June 15th, 2009

sp-with-fib

Our pattern of being range-bound between the 200-day moving average and the resistance line around 950 on the S&P 500 Index continued today in spite of the sell-off.

The Breadth Chart that I posted yesterday was pretty accurate in showing that we were ready for a bit of a pullback. However, if you look at the volume on the chart, it was low. A low volume sell-off does not indicate that we have a change in technical outlook, particularly given that the trading range was not violated.

Oil was down, but it didn’t break our uptrend line by falling below the 13-day moving average line.

wtic

Gold, however, has broken its support levels in quick fashion. We need to manage our positions and determine if we should sell or add to them. Given the monetary stimulus from the Fed, this may just be an add-to opportunity.

gold

The Dollar rallied hard today on news (coordinated by the Fed?) from Japan and the BRIC countries that they really like the dollar in spite of other recent statements and that it is the reserve currency of choice. You can see that the rally stalled at the 34 day moving average. Given the monetary stimulus, there is no reason to believe that this is anything more than a counter-trend rally.

usd

All in all an interesting day in the investment world.

My best hypothesis is that we will get a bit more sell-off but that there will be a need to move the market higher before quarter-end by the Wall Street firms. Based upon the low volume today, this could just be a coordinated effort to draw in the shorts so that they load up with new bearish positions, then the big Wall Street players will push the market back up, forcing the shorts to cover their trades into month end.

Sorry to be such a skeptic. The last year or so has really been enlightening in terms of the manipulation of the markets by Wall Street and the government. It makes the job of managing money difficult at best.

Mark