Year: 2012

Interest Rates, update

Hamilton

Japanese 10 year yield

This is a great chart, unfortunately I cannot find the source but you can get the charts separately from St. Louis Fed and the Japanese Treasury Department. I have added the last few weeks!     Since the announcement of the 40 bln. / month purchase of mortgage backed securities for an unlimited period in the future, interest rates have actually moved up, but so far at least not in a meaningful way. In the mean time Japan has joined the group of Central Bankers by announcing another 10 trillion yen of bond buying ( about 125 bln. US, bringing total to 700 bln.) Other Central banks have simple lowered the fraction in fractional-reserve banking or, as in the case of China, gone straight for infrastructure improvement programs.

Japan is not America, that much we do know. The yen is not a reserve currency and Japan holds about a trillion US dollars as reserves. China another two trillion. So the US is beholding to its creditors, for Japan this is mostly an internal matter. Japan has an aging population and is not keen on immigration. The US has a much younger generation but is nevertheless not that keen on immigration anymore either! Japan has a collective mindset, the US for the most part subscribes to Ayn Rand type of raw capitalism. I don’t think any of this really matters, what does is that Japan embarked on a easy money policy years ago and its stock market is still down 75% and real estate about 80%. If the US follows this example we would have another 14 years to go, that is to 2027, give or take a year. The assumption seems to be that the Fed. can do what it wants but perhaps this will prove to be incorrect.

US 10y

The US 10 year bond on this log-scale chart,  could have made a nice wedge which could be complete. If it is it should break the upper trend-line soon. The alternative is that we just completed a 4th wave which would allow for about another 1/2 year of low and lower rates. That is the least likely alternative at this time, preferring the scenario where rates start moving up right away. See our previous blog of June 7, 2012.!. Below is an additional chart of the 10 year constant maturity. From 15+% to about 1.5%

10-Year Treasury Constant Maturity Rate (DGS10) - FRED - St

SLB , Schlumberger update

Hamilton

slb sept 2012

This one is following our script to the dollar, stopping precisely at the first target of $55 (see previous blog). Since then it has almost completed an a-b-c correction that has taken much longer than expected but nevertheless fits the scenario to a T. This does not bode well for the outlook for oil stocks in general.

PFE, Pfizer update

Hamilton

Again the then, Dec. 2010, and now charts;

pfe dec 2010pfe sept 2012

There are various blogs in between advising exiting the position and, in contradiction to that, waiting for targets at $24 and $28 (all are in the archives). You are up about 40% if you held on to this stock from Dec. 10 onwards. Now that things are a little clearer we would prefer the A-B-C count as opposed to the 1-2-3-4-5 possibility. The two legs are roughly equal in size if not in an absolute sense than proportionately and both the RSI and MACD have been turning down for some time.  The same holds for BAX, Baxter.

ELD, Eldorado

Hamilton

The usual then, 6 of June 2011, and now charts;

eld b 6 june 2011eld sept 2012

Eldorado is another gold stock that we have commented on before and had completely forgotten. We singled out $10 as the ideal first target for this stock for the simple reason that it represented the base of a very clear wedge into the highs. The stock did exactly that and has been rebounding for quite a while. The nice thing is that the drop from $22 is a 5-wave sequence, clear as a bell and having an expanding wedge for wave 5. It has just retraced all of that 5th wave as is to be expected. In the mean time both the RSI and the MACD are at nose bleed levels indicating a turn soon. The stock has retraced about 50% of the fall and could do a little more (to $17 maybe??) , but once done the drop should resume with at least another 5 wave sequence. If the second leg is equal to the first it would target $5, very close to the low point of the expanding triangle wave 4 of previous degree. By the way, this is a very low cost producer!!