1st Hour: Some Thoughts on the S&P 500 and the US Dollar Index
(5:00) Wall Street overview: Friday's numbers. Small business index declined. All major indexes back into negative territory for the year. Corporate earnings season over, focus is back on economic numbers and unemployment. Worsening trade deficit, rising jobless claims. Good news: ECRI leading index is ticking back up. Global stock markets lost 2 trillion this week. Fed says growth will moderate. Winner this week was bond market. Yields fell across the board. Mortgage rates at record lows. Refi's accelerating. Energy markets down this week. Oil lost 6.6%. Worst week in a month and a half. Dollar rallied on spread in Europrean debt markets, weighing on oil price. Gold for Dec delivery down as dollar rose. Gold up 1% for the week. Premiums for gold and silver coins rising again. Gold Eagles $98 above spot price. Silver Eagles at a $7 premium. Bullion business is still robust.
(11:22) Ron Griess, technical analyst from www.thechartstore.com, speaks about troubling divergences in the MACD (Moving Average Convergence Divergence) Oscillator on S&P and USD. Charts pertaining to the discussion can be found in his recent article "Some Thoughts on the S&P 500 and the U.S. Dollar Index." Still has concerns going forward until MACD turns positive. Head and shoulders pattern setting up. Could very easily see a sharp correction if breaking support line. Ascending wedge also forming. Very strong correlation between USD and asset classes.
(23:30) Dividend investing, strategic and tactical asset allocation. How to invest in a zero-interest environment. Danger of annuities and bond funds. What are the fees? Stability of insurance company offering the annuity. General recommendations: diversified among bullion as hedge against dollar risk, high-quality bonds in foreign govts of commodity producing companies, high-quality equities producing good dividends, having strong balance sheets, large moat, global franchises less affected by the business cycle, i.e. utilities.
(48:00) Q-calls. (Jim's responses not shown). 1st call: Fed Bullard switches from inflation to deflation, promoting QE2. Fed is hoping to push cheap money into private sector. Jim's thoughts? 2nd call: Says value-added tax is not compound. 3rd call: Last week's interview, gold is too expensive in terms of urban survival, role of silver? 4th call: In response to Aug. 7th interview, recommends website for seeing how all representatives voted and correlation between campaign contributions: maplight.org. 5th call: Any good agriculture investments, funds in farming? Jim: Two ETFs: MOO and DBA. 6th call: Recommends a show on what would a gold standard look like today, possible song for show. 7th call: When does Congress normally announce budget? 8th call: Would like to hear about power of money lenders, Federal Reserve, relationship to bible, Christian theology, and how gold is true money. 9th call: Anything that would change your mind on peak oil and bullishness on gold?
2nd Hour: Debt Forgiveness & Trading Markets
Chris Whalen: Doesn't think private sector ever recovered. Most assistance has gone to banking sector, not trickled into economy. Households still stuck with too much debt, strategic defaults still high. Available sources of credit and demand for loans not there. Since the cash markets are so tight banks are enhancing their returns through OTC derivatives, complex structured assets. Dodd-Frank doesn't eliminate the risk being passed down to bank customers. OTC is a creation of the Fed, a retrograde model being used since banks are not profitable on an exchange based system. Mentions upcoming book, Inflated: How Money and Debt Built the American Dream. So much of what was thought to be GDP in the past was simply funded with debt. Contrasts to SNL crisis and current credit crisis. Federal Reserve zero interest-rate environment is simply leading to greater excesses in derivative markets, which simply funds the banking institutions and not the individual investor nor those focused on saving for retirement.
(21:20) Bill Fleckinstein: A whole generation of investors, fund managers who grew up under Greenspan's tutelage that are now facing a wake-up call. Expects market to remain difficult. Too many people relying purely on charts, quantitative analysis, and not fundamentals. Doesn't recommend going short at this point until QE2 is behind us. Upside very limited too. Don't put money in a bond fund. Money management industry moved from its roots, prudence no longer important. QE2 is coming, may not precipitate another bubble but could lead to a peak in bond market. Companies not likely to take on more liabilities, i.e. employees, with capriciousness and unknowns related to current administration. Continually asking the prudent to bailout the reckless. If the realestate market got down to a place where it was cheap, people would buy but the government is trying to prop it up for those who bought at overextended levels. Thinks money is still to be made in gold stocks. Finding reserves for gold and silver is very difficult. Stock market is uninteresting at present but does believe in beneficiaries from money printing: gold, gold ming stocks, etc. Writes a weekly column called Contrary Chronicles and features content at www.fleckensteincapital.com.
(42:10) Q-calls. (Jim's responses not shown). 1st call: Gives a website concerning a new solar thermal technology being used at www.websites-host.com/energy. 2nd call: Says Matt Simmons was way off on his assessment of BP's main blowout being miles away from the one they showed on TV and that Jim should have done a better job at taking him to task. 3rd call: Asks for people to email Alex Jones urging him to appear on Jim's show next week since he didn't want to join the debate. 4th call: Says q-caller from last week was incorrect about all oil flowing on top of the water. Some, like heavy sour crude, does not float but is heavier than water. 5th call: Advocates what's called "institutional memory" with previous forecasts by guests. Basically, calling them out when a previous forecast didn't unfold the way they said it would. 6th and 7th call: Speak about the loss of Matt Simmons and how they'll miss him.
3rd Hour: Roger Conrad's Thoughts on Investing & A Tribute to Matthew R Simmons
Roger Conrad: As we come out of this recession, there is tremendous upside potential in dividend paying stocks like utilities. Over the next 10 years, over a trillion dollars are needed for our power infrastructure, which will require a fair amount of investment. Many of these companies are using the lowest corporate borrowing rates in 40 years to refinance their debt and reduce balance sheet risk, locking in long-term profitability. Sees potential in major oil producers and water utilities. Growth story for water is in aging infrastructure, privatization of municipalities. American Water Works bought out by German company in 2002 then pieced out after change of management and considers it more valuable now. Does not believe we'll see a repeat of 2008 but given zero to low interest rate environment finds high dividend-paying utilities a good place to generate income. Gives weekly comments at www.investingdaily.com.
Tribute to Matt Simmons
(17:43) All clips that follow mark the beginning of a previous interview with Matt and the topic.
(25:26) How Matt's participation with the CIA in reviewing oil reserves worldwide eventually led to his discovery of peak oil.
(35:18) 2nd clip, Peaking of Saudi Arabian oil fields leading to a global peak.
(39:31) 3rd clip, Factors that have led us to this point.
(46:36) 4th clip, Ever-increasing average age of drilling equipment, especially off-shore, and the danger it presents upon an already thinly stretched energy infrastructure.
(52:25) 5th clip, Jim asks Matt what he would do if he were elected president.
(58:51) 6th clip, Controversial comments on second BP leak.
Matt Simmon's solution to peak oil: www.oceanenergy.org.
Note: Thanks to FSO Staff Member Cris Sheridan for his summaries of the Financial Sense Newshour content.
