Stephan Harper and his Conservative Party of Canada - with one mighty swing of the bat - ala 'El Bambino' - pulled off a stunning 'walk off' three run shot in the late innings to win the biggest game of the season. A dream come true for the right wing by gaining a solid/comfortable majority, squashing the once mighty Liberal Party into a pulpy pate, and virtually eliminating the 'anti-confederation' reign of terror BLOC separatist party.
I earlier prognosticated a very slim majority mandate but totally underestimated the resurrection of the reborn wacky, but lovable, NDP crew. Almost half of the New Democratic Party - (and I do mean very New) - freshly acquired seats now reside in schizophrenic Quebec. Ever smiling NDP party chieftain Jack Layton will effectively be the new voice of the 'new' Francophone separatist movement from his home in downtown Toronto. Rene Levesque must be rolling over in his smoke filled grave.
The 'first time' opposition party caucus is riddled with 'almost' university educated 20 somethings & one 19 -who will be filling out their first meaningful T-4 taxation slips ever! One shudders at the thought of a split minority government with the balance of power in the tender tattooed arms of student loan paying idealists. I can hardly wait until Parliament reconvenes. It will be 'sick!'
Speaking of reigns of terror - the world's #1 most wanted felon OBL has finally been unceremoniously silenced while luxuriating in a virtually unprotected 'mansion' in Pakistan. Looks like cave life ain't all what it's cracked up to be? With the head of the chicken cut off - hopefully the soldiers will soon be returning back home to meaningful employment.
The long line at the Sovereign bailout trough is finally beginning to progress. Portugal accepts US$110b to solve their urgent and serious credit problems by getting deeper into debt (?) I tried that once - and it didn't work out so well. Ireland, Greece, and Spain are waiting patiently in line for similar simultaneous debt contraction/expansion treatment.
Is it my imagination or does life seem to change dramatically on a weekly - as opposed to yearly basis now?
In the US the bulk of earnings have been reported with over 70% beating expectations and by an average of 5% plus. Economic statistics (ISM, Construction Spending, & Employment) have been lumpy to negative and somewhat suspiciously supports Congresses freshly demanded debt ceiling expansion for a further US$2T (15% increase) to keep the lights on and the water running. The beleaguered US dollar had no place to hide - and has sadly revisited all time low territory as a result of the obvious fiscal/monetary mismanagement. The US Treasury has announced a full snoot full of quarterly offerings which will raise $72b in new 'fresh' cash and effectively exhausts their borrowing capacity. Further 'credit expansion' will require emergency measures which include dipping into federal employee pension piggy banks - at a time when they should be adding to them.
The DJIA remains solidly above my key 12,000 level with the DJ Transports recently breaking into new all time high territory ( Dow Theory bull signal). The S&P has also constructively consolidated above the key 1,300 level. US markets are fairly priced with very positive liquidity potential. I remain postive until key lower levels are violated.
The commodity sector has been viciously rocked by significant CME margin requirement demands. My earlier 'margin squeeze' comments calling for 'wild and woolly summer volatility swings' remains unchanged. Gold has dropped a 'normal' 7% from recent all time high territory with Silver taking the brunt of the selling dropping almost 30% in a single week! Over the span of 5 days margin requirements were raised 4 times making it a stunning 84% more expensive to trade Silver. The Gold to Silver ratio has rocketed from 30 to 40 times in world record time.
It appears as if the regulators were somewhat over zealous & panicked to 'cool off ' the prices in the precious metals complex. Recent purchasers have received a very expensive and painful education about the hazards of commodity speculation and position squaring. I remain bullish and view this 'shakeout' as an ideal accumulation opportunity for the longer term investor. (Silver US$35-38 Gold US$1,350 -1,425). The Gold and Silver intermediate and senior stocks have never been cheaper relative to lofty underlying metal prices. The lion's share of the 'downside' has been priced into most issues assuming underlying commodity levels remain range bound.
Copper has negatively broken $4 and has formed a rather formidable longer term top. A retest of $3.50-.75 appears to be in the offing.
Crude Oil has also caved into 'margin' pressure and looks to test the 200 d ma of $95 and hopefully somewhat lower prices at the pump. Natural Gas rallied to $4.75 but could not breach January highs as of yet. I continue to believe an Oil to Natural Gas ratio of currently 23 times is excessive.
In Canada markets (TSX 13,500) have been in somewhat of an accumulation/distribution phase for almost 2 months. My earlier concerns of 'good news' having been priced into the issues appears to be reality. The Financials are soon to report and best not disappoint - or all 'heck' might break loose! The Banks remain fully priced relative to current fundamentals but pay tempting and juicy dividends relative to zero one gets in a savings account.
For those who believe in the long run 'irresponsible government' inflation scenario - Cdn Gold and Silver issues corrected significantly prior to the 'margin meltdown' - and now represent 'derisked' and levered opportunities. Recent earnings/dividend growth has been solid and most of these companies will remain profitable and in very strong financial condition.
Senior Oil & Gas issues have broken key support levels in spite of reporting stellar earnings and exceptionally healthy balance sheets. They are also quickly approaching over sold and tempting entry levels for those who choose not to 'sell in May and go away!'
Highly leveraged small and micro cap TSX-Venture resource issues have also corrected significantly and offer very interesting and compelling opportunities for risk taking accounts.
Key TSX level for an upside breakout would be 14,000. A significant downside break of 13,250 would be dicey.
Bottom Line: Prior to the recent "Margin Massacre" commodity markets were certainly over extended and due for a constructive pullback. I am highly suspicious of the magnitude and velocity of this week's very aggressive margin hikes which will effectively move core positions from weak into strong hands.
Very little (if any) has changed in repect to world wide demand, ample liquidity, and outstanding corporate financial conditions to alter my longer term bullish view. The 'Agra' sector will most likely experience another very positive year with ongoing 'supply' concerns at the forefront. North American equities are fairly priced with a number of compelling sector opportunities. Markets will remain nervous and volatile most likely until QE II and debt ceiling issues are resolved. Markets will remain relatively range bound but swings will be sharp and sudden.
In the meantime - we will soon have the special opportunity to listen and learn from the collective wisdom of our 6 newly minted 20 year old 'Honorable Members of Parliament' - just as soon as their parents move all their 'stuff' out of their university residences and 'cash in' their empty beer bottles!
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