COMEX to run out of gold in August 2013

At this rate, the COMEX will run out of deliverable gold on 14 August 2013.

Yes, that's only 2 months from now!

You decide what will happen when people can't redeem their physical gold and instead get a paper settlement.

David Morgan explains how little physical gold there is in the COMEX (scroll to 12:00).

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China Gold Imports from Hong Kong in April 2013: Disappointing

The China Gold Imports from Hong Kong in April 2013 came in lower than expected, but still very high. I had hoped for a higher number with the decline in gold price...

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COMEX not to be trusted?

While updating my COMEX charts I found something odd.

"The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only.

For questions regarding this report please email Registrar@cmegroup.com or call (312) 341-3370."

I wonder why they put that in their reports...

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Correlation: S&P Revenues Vs. PMI

Dr. Ed Yardeni's blog is a pool full of critical information and one of them is a newly discovered correlation which I will add to my collection.

Apparently the PMI is a leading indicator for the S&P revenues, which also means the PMI is a leading indicator for the overall direction of the stock market. This is consistent with the correlation between the PMI and the GDP, which is correlated to the total stock market index on itself via the Warren Buffet Rule.

So if you want to know the direction of the earnings of the financials, just look at the PMI and you can predict the trend, which is certainly down after the miss in PMI reported the previous week.

Chart 1: S&P 500 Revenues Vs. PMI

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When will inflation in Japan show up?

People are wondering if the money printing experiment in Japan is actually going to be inflationary or not. As we all know, the inflation rate is measured by the CPI (consumer price index). If the CPI goes up, we have inflation.

The CPI of Japan consists of the items given in Chart 1. The items with the most weight in it are food, housing, transportation and fuel. Therefore, it is important to watch food and energy costs as well as housing prices in Japan.

Chart 1: Items in CPI of Japan (2010)

First, let's look at food prices. Zero Hedge reports that McDonald's has hiked the price of a burger in Japan by 20%. If we consider this price hike as a proxy for the overall food price in Japan, we could see a significant increase in the CPI coming.

Second, we take a look at the Japanese housing market. The Japanese housing market has always been in a decline for the last 15 years, but now we see signs of stabilization. Housing prices are about to rise in the coming years. In the metropolitan areas for example, we have seen land prices go up at an annual rate of 11.5% in 2012.

Third, fuel and energy costs are going through the roof. With the Fukushima disaster, a part of the nuclear energy had to be diverted to fuel. In fact, LNG imports soared to 86.9 million tonnes. Added to this disaster, the yen weakened considerably in 2013 which led to rising fuel and energy costs. We can witness this in the rising LNG prices in Japan. These events are a very good example of why a weaker yen is not a good thing, instead it creates an environment where people's purchasing power declines. In this case the price of the imports of fuel are going up and this will add to the trade deficit of the country. The statistics bureau of Japan recently put out the latest numbers on the CPI. Fuel was contributing the most to the rising costs of living.

Table 1: Consumer Prices: Change from the Previous Year in 2012

So basically, we see that the 3 biggest components of the CPI are going up in Japan. It would surprise me if the CPI would decline in the coming months.

Continue reading here.

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Manufacturing PMI goes into Recession/Depression Territory

Look at that => Blue Chart. 

Yes, we crossed below zero for the PMI. Do you really think GDP growth will still go up?

Three words: Not A Chance...

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What do the latest GDP numbers tell us?

The GDP numbers came out this week and there was 2.4% growth yoy:
http://www.reuters.com/article/2013/05/30/us-usa-economy-idUSBRE94T0HI20130530

So what does this mean to your equity positioning?

The following chart is used to give a valuation on the stock market and gives you the tool to position yourself. It is based on the total stock index (DWCF) divided by the GNP.

The latest data says that GNP was 16.236 trillion in the first quarter of 2013.

Table 1: GDP and GNP

If we look at the Total Stock Market Index (DWCF), we have 17015.

Now divide 17015 by 16236 and we get: 1.05.

105% is modestly overvalued according to the Stock Valuation Table.

Stock Valuation Table

So I wouldn't buy equities at this stage.

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