Here are a few excerpts from this week’s set of interviews, which recently aired to our subscribers (click here for more info).
Christopher Quigley on a Dow Theory sell signal and the current bull market:
"The prime element to take from Dow Theory is you can only work with price action. You're not making judgments; you're not making assumptions—you're reading price action. At the moment, we do not have a short-term Dow sell signal nor do we have a primary change in trend [however] we are at a very fascinating critical juncture in the markets for two reasons: 1) we are getting potential Dow sell signals and 2) the 200-day moving averages on both indices could potentially break...there is one additional technical indicator which I also use, which is the advance-decline line and in the case studies I cover—the tech crash of 2000, the rally in 2003, the subprime bust in 2007—the New York Stock Exchange advance-decline line always broke in unison with Dow Theory. At the moment, there is no weakness in the advance-decline line [and]...indicators are telling us that the current bull is still very strong..." (click here for access)
Stratfor's Reva Bhalla on how the massive 50% decline in oil has reconfigured the geopolitical chessboard:
"I think first we have to look at Russia. Oil prices are the driving factor behind Russia's huge vulnerability this year and so, as we see today, Russia is in a big financial crunch and not seeing any big relief any time soon. They're having to make big cuts not just to their defense budget, which Putin has prioritized but also to social benefits: pension funds and things that would risk social unrest. So that's something that Putin is going to have to manage very carefully as the Deputy Prime Minister of Russia said today there are no rainbow illusions about the economy. They know this is going to be a huge crunch and so therefore we have to look at how the economic stress on Russia is going to influence moves on the military front. Secondly, I'd look at Europe. Obviously, Europe is struggling. They are under huge deflationary pressure and they have big concerns about that. And so as we saw low oil prices, those deflationary concerns escalated and that's what pushed us now into this QE phase..."
Do you think we should expect to see the same level of market disruption that occurred with Russia during the 1998 Ruble Crisis?
"Certainly, Russia is going to be going through a great deal of pain but I don't think we're going to see Russia get to the point of financial collapse. Right now if we look at the government's reserve funds that they are drawing from, these numbers fluctuate but last I looked the currency reserves in their welfare and wealth funds, you're looking at around 398 billion down from about 600 billion in mid-2014. So, they are going to be drawing on those funds even when it comes to pension and things like that—that's something they did in 2008, it didn't result in a huge blacklash then so that's a risk that they'll take again and we're going to see smaller banks fail; we'll see more consolidation in the banking sector...and the Kremlin is going to have to be very selective in who it's going to help out...so it's going to be a very very careful balancing act for Putin. I think he will be able to manage it through this year but I don't think we are going to see that sort of mass chaos, financial collapse like we saw in '98..." (click here for access)
John Kaiser: little economic incentive to mine gold at current prices...
What is the all-in cost to mine gold today and does that make gold mining profitable at current prices?
"Well, it varies who you include and what assets you include but it's about somewhere between $1200 and $1300 for new projects coming online. Of course the legacy projects that were put on-stream years ago have much lower operating costs so those ones drag down the averages but it's the cost of bringing new gold mines into production; that's the key issue and estimates range between $1200 and $1400, which means that if this becomes the new long-term price for gold there aren't going to be an awful lot of new mines put into production, especially given the high capital costs associated with doing so. This of course turns the question into one of will the world want more gold down the road or is it happy to just shuffle around the 5.4 billion ounces that have been mined since the beginning of mankind? ...If we get a global expansion under way again, it is my view that the global demand for gold will soar beyond the gold that's in existence and that will require a real price increase because at $1200-$1400 gold, there is not great economic incentive..." (click here for access)
Urban Carmel on possible low in the market this month:
"February does tend to be weak and if there was going to be a low in the market, February would probably be the month that low would take place or early March is when it would take place...I think that would be a very bullish setup. We've been down 2 months. Bull markets don't generally close down three months in a row--it's very rare if they do close down three months in a row. It's certainly not going to close down four months in a row, unless the bull market is over--that's been a pattern going back since the 1980s. The fact that the market has already closed down 2 months in a row, weakness in February should be setting up a low..." (click here for access)
Our market technician for this Saturday is the well-known Tom McClellan. Tom and Jim Puplava discuss the current choppy, sideways market conditions. Tom expects positive seasonality will gain some traction this spring and we should see significantly higher market prices by the summer. They also discuss the gold and oil markets, with Tom looking for a bounce in oil, which he believes will peak in March and then head lower again. In Saturday's Big Picture segment, Jim looks at the big wildcard for 2015 and what it means for the markets. Be sure to tune in by visiting our Newshour page or in iTunes by clicking here!
