January 19, 2015
Weekly Market Outlook
By Keith Schneider
Well, the first two weeks of the year have been completed and global markets are clearly dazed and confused, catching even the best off guard. The SPY is down 2%, and its all-time highs about 1.5 % higher from there. The triple point moves on a daily basis underscores the underlying confusion perfectly.
Those who seek the truth by using fundamentals to guide their investment decisions might be better served by putting on a blindfold and taking some wild guesses. Even the best at acquiring better information by sitting in on critical meetings of central banks and Federal Reserve emergency meetings got blind-sighted. Goldman Sachs and their Muppets (dumb clients) got mauled this week when the Swiss National Bank decided that trying to keep its currency pegged around the Euro was no longer a good idea. Swiss Banks will now charge for keeping your deposits, removing its peg to the Euro.
It caught Goldman (according to Goldman) and its clients unabashedly short the Swiss currency, which opened up over 30 times higher than its normal trading range. These trades are normally highly leveraged. Everest Partners, a 2 billion dollar Hedge Fund who has been in business for over 25 years is shutting down after suffering massive losses. The full fallout is yet to be determined.
Did I forget to mention that Oil is collapsing and there is $175 billion of junk debt related to Oil drilling? Underscoring that, JNK the ETF for junk debt has been crushed and relative to US Bonds, shows no signs of abating. T Bone Pickens, the energy maverick, thinks many smaller producers will go out of business as OPEC keeps the spigot on. They will be forced to shut down as oil prices stay low, thereby creating more demand and, voila, oil will be back up to $100 a barrel in no time. A very typical boom and bust merry go round. On the other hand, no stranger to the oil market, multi billionaire Saudi Prince Alaweed thinks prices for Oil will never be over $100 again.
The copper market has dropped to levels near the lows of the financial meltdown, confirming fears of upcoming Global recession. But wait a moment, maybe the US growing at a robust 5+ % will pull the rest of the world back up and is the leading indicator? On the other hand, when Copper drops while Gold rallies it is often an indicator of trouble ahead for stocks.
Stocks finally rallied on Friday with rumors that the plunge protection team was buying, while four of the largest Greek banks asked for bailouts as a run on deposits was accelerating.
During times like these trying to figure out the cross currents is best done by some old fashioned chart reading and for that try this week’s video.
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