July 2015

Fear vs Greed

Reasons To Remain Open To Bullish Outcomes For Stocks

Any data that tells us to keep an open mind about better than expected outcomes must be confirmed by the stock market; something that has not happened yet. For example, if the stock market is to rally for the next few months in a surprising manner, that is not possible as long as the S&P 500 fails to make a higher high above 2,134. Our market model does not make decisions based on what “may or may not happen”. Therefore, the only real value to the table and video above is to help us remain open to and prepared for all outcomes (bullish and bearish). A few reasonable S&P 500 guideposts relative to improving bullish probabilities include 2096, 2107, 2116, and 2134. Each push above a guidepost level improves the odds for the bullish case. Below these levels, the expression “the market has some work to do” applies.

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More “Funny” Data from the Government

In the past, I documented the overstatements by both the IEA and EIA in 2014 & 2015 in terms of supply, inventory and understatements of demand. Others also noticed these distortions and, whether intentional or not, they exist and they are very large in dollar terms. These distortions, which are affecting price through media hype and/or direct/indirect price manipulation, are quite possibly the largest in financial history.

Putting numbers behind it, with worldwide production running some 95 million barrels per day, and assuming $55 per barrel for oil, the market for crude oil is about $5.2 billion per day. Each $10/Barrel change is worth nearly $1 billion/day or $365 Billion/year for the worldwide crude oil market. Add the worldwide equity market caps of oil and oil related equities and debt you have a scandal that is in the trillions; a number that cannot be ignored.

According to Cornerstone Analytics, who have documented the IEA systematically underestimating demand in 2012-2013 only to revise it higher quarters if not years later, the EIA has created the appearance of an imbalance of supply by some 500 million barrels or $2.5 trillion in the last 5 quarters alone. This has easily swung oil by at least $20/barrel if not more.

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Greece Should “Shoot the Dog and Sell the Farm”

The bell is tolling for Alexis [Tsipras]. European leaders from all sides have abandoned him as he burns through every last bridge that was once in place. His only meeting of importance during this crucial week of negotiation is with Putin – which clearly does not inspire any confidence for a near-term resolution.

It is actually amazing that we have not seen any of the left-leaning party leaders from the rest of Europe running to Tsipras’ side as he truculently engages his paymasters. Where are all these European anti-austarians? Of course they are hiding from the Germans, hoping not to receive the same fate as Alexis. So there he sits, alone and under his last Soviet-held bridge, just like Hemingway’s Robert Jordan. He is waiting to cause just a little more damage before his time is up.

In the end, there is no question that the Germans have executed a near flawless plan to humiliate and vilify Greece. The Greeks now stand as poster children for European profligacy. And they are being paraded through every town square in the EU, in shackles, as the bell tolls near the gallows for their leader.

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