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Mr Dines strongly recommends a subscription to Interim Warning Bulletin (IWB) for potentially urgent messages or when we change our advice due to volatile or changing markets, and you don’t want to wait until our next Dines Letter publication to receive our message. (IWB consists of a variable number of issues, depending on changes between TDLs).
See samples of past IWBs here: February 4, 2014, February 21, 2014, August 26, 2015, and June 9, 2016.
©2016 James Dines & Company - PO Box 22 Belvedere CA 94920 All rights reserved
Previously Issued Interim Warning Bulletins (IWBs) for Your Historical Consideration
Interim Warning Bulletin 4 February 2014, Volume 2014, #2
Our last IWB (on 27 Jan 14) concluded that "The current (decline) probably has more to drop." After some counter-rallies, leading averages have indeed continued to decline. How much lower stocks might decline, and for what length of time, are the key questions being widely asked these days. To better weigh the conclusions, we examine some clues that might reveal the causes of the selling. Recent snow storms are widely blamed for the business slowdown, which obviously impacted sales of automobiles for example, but we are skeptical that that alone could cause a widespread stock-market decline because snow storms are temporary and did not blanket the entire nation.
Plain profit-taking by traders who had accumulated big gains since the 2008 crash lows is surely part of it. USA Today newspaper's front-page headline today read, "Fear Reigns on Wall Street." Plus scared selling by investors who are still frightened to hold stocks after 2008's traumatic decline. Confirming that factor as part of the answer is that the Dow- Jones Utility Average and bonds are rising despite generally weak markets. Our take is that fearful money is avoiding risk by seeking stable value and safe harbor even in dangerously overpriced areas, such as government bonds. If this is really a flight to safety, Nasdaq speculatives and real estate should also be weak, and indeed we flashed a "Sell" on real estate in our last IWB. US Government Treasury bonds are in a slight rally, but we doubt they will get above their October 2013 highs. Corporate bonds are in a more meaningful Uptrend, although we find it sad that corporations are considered more financially secure than governments. In times of intensifying Mass Fear many often seek the safe harbor of gold bullion, but gold-mining shares are rising instead, which is curious. Wouldn't gold bullion be better protection from Mass Fear? Yet gold bullion is flat near its lows, while gold-mining shares are edging higher. Same for flat silver bullion and rising silver-mining shares. Our analysis is that the entire natural resource sector's stocks have been rising -- including Rare Earths, and even uraniums (see Cameco) -- so maybe this Sector is being bought just because its stocks are so underpriced. Natural resources have been coldly ignored by the latest bull market of around six years. Is DIWPAT (The Dines Wolfpack Theory) suggesting that the bear market for natural resources that began in early 2011 is finally ending? We do not have enough evidence yet to be confident of that conclusion, but we have an eye on it, and are weighing "Buy" signals in that area. We also pondered whether "The Coming Great Deflation" is a hidden key to understanding stock markets these days. Indeed, the mainstream press has actually begun to finally use the word "deflation" in its reporting (see excerpts, below), probably finally awakened by the worldwide weakness in currencies. Long- term TDLrs might recall the 1997 currency crash that began in Thailand, that almost brought down several Asian economies. The dawning realization that the deflation we have been predicting --
see our Annual Forecast Issue starting on page 21 -- is finally slithering out of the swamp of mere possibilities. We are at the dawn of the sixth year of the bull market that began on 6 March 2009, and there have been many tummy-twisting drops since then, every single one of which was eventually followed by leading averages eventually moving into new all-time high ground. We regard that as a "Trend in Motion," meaning that the burden of proof is on the pessimists, as per DITREND (Dinesism #1). The chart on page 12 of our Annual Forecast Issue headlined that "Stocks Are Still Overbought" and thus vulnerable to declines. Markets have been forecasting Overbought Indicators all the way up, so we have no odds of knowing when the decline toward "Oversold" should occur, when the tension is much like the energy eventually released by an earthquake. Relatively few Security Analysts even dare to attempt to give explicit "Buy" and "Sell" signals and stops. As challenging as that is, almost nobody has the courage to give specific predictions as to the length or height of the next move, but we'll stick our necks out and suggest this: The Standard & Poors Average of 500 leading stocks has declined around 5% from the high, and there have been plenty of them all the way up. Furthermore, there is important Support in the 1650-1750 area, which would make it around a 10% Consolidation. Many individual stocks that were Overbought in December are now entering an Oversold condition, suggesting that a resumption of the Uptrend should arrive in a matter of weeks. While the market gives no guarantees to anybody, the pattern since 2008 has been that the way to make money in recent years has been to buy such setbacks before they soar to new highs. That said, January's weakness suggests that 2014 will be a generally weak year, based on the Seasonality feature on page 36 of your Forecast Issue (14 January 2014). So-called "emerging stock markets," more speculative ones, have already had a bad year. Even Japan, a developed nation, is down 14%. In conclusion, within the above constraints, we like the stocks in our Supervised Lists and are holding some of them without stops because we intend to ride out what should be tremendous growth in the 3D Printing area for example. Our last TDL has stops for some other stocks, but please remember that we do not give "Sell" signals, which are entirely your decision; We'll add our two cents as additional input for your final sell conclusions. However, we would like to take a tentative step by upgrading our views on precious metals mining stocks to a short-term "Buy," on silver-mining stocks generally, keeping in mind that DISSA (The Dines Silver Stock Average) made its last Low as recently as 19 Dec 2013, but has been edging higher since then. Our stop on DISSA is just below that Low at 53, and those with favorite mining stocks might consider beginning to buy small positions. We are still groping for the main gold trend, as its short-term moves are particularly deceptive. Amazon was stopped out at 359, and we are experiencing "seller's remorse." So we hereby re-recommend it, now around 349, with an aggressive new stop at 339. Next TDL tentatively scheduled for 28 February 2014.
CONDENSED, SELECTED EXCERPTS FOR BUSY TDLrs: CURRENCIES: 1. Argentina's government allowed its beleaguered peso to slide farther against the US dollar to stave off a possible currency crisis that risks pushing the country into a recession. Economists doubted they would work without an attack on the real source of the country's mounting economic problems: rampant government spending and a loose money policy that has caused one of the world's highest rates of inflation, estimated at more than 25% a year. It threatens the source of President Cristina Kirchener's power, which relies on spending and subsidies to ensure popularity. The president pledged not to devalue the currency, so this leaves her credibility in tatters. Too few reserves might prompt the country to default on its debts again or fall into a deep recession because it can't buy the imports it needs to keep its economy going. The government needs to devalue the currency to protect dollar reserves and shore up exports, but the devaluation will cause inflation to rise farther by making imports more expensive in peso terms. Any attempt to corral inflation from the devaluation means cutting spending, which reduces economic growth and is politically toxic. Government spending as a percentage of annual economic output in Argentina has risen, hitting roughly 40% in 2013. And the central bank is widely seen as holding interest rates below the rate of price increases -- prompting Argentines to spend rather than save. Department stores have already begun marking up prices on televisions, laptops and other items. A 55-inch HDTV set that cost around 26,000 pesos on Tuesday was selling for almost 32,000 pesos, or 23% more, on Friday. The country's long history of financial crises, including inflation that peaked at around 12,000% in the 1980s includes its 1975 currency devaluation, which caused inflation to spike to 300% from 50% within 12 months. When retailers don't know how much the peso will be worth, they start withholding merchandise, assuming that it's better to keep valuable goods in stock than to sell them. If inflation gets worse, you start to see retailers who won't sell goods even when consumers want to buy them. Since October 2011, the government has allowed limited sales of dollars to businesses that need to buy imported goods and people who want to travel or as a hedge against inflation. Residents must fill out a form on the Internet, attach their tax ID number, and still pay a 20% tax on the transaction. And even then there is no guarantee they will get the money. Ken Parks & Taos Turner, Wall Street Journal Ed: All TDLrs have often been advised to have some assets in more than one country. MARKETS 2. The euro area is getting perilously close to deflation. The legacy of the acute phase of the crisis remains a grim one. The euro-wide unemployment rate stayed stuck at 12.1% of the labor force. The hope now is that it may start to edge down as a weak recovery continues. Consumer-price inflation has become worryingly weak. The headline rate fell to 0.8% in the year to December. The core rate, which strips out more volatile items
like energy and food, dropped to 0.7%, the lowest ever since the euro started in 1999. Inflation is now uncomfortably far beneath the target rate set by the European Central Bank (ECB) of 2%. Inflation raises the risk of outright deflation. If prices were to start falling, it would intensify the eurozone's woes which are bound up with excessive debt, both public and private, in the most vulnerable economies. Deflation would cause that debt to rise in real terms. It could also stymie the recovery as people delay purchases because they will become cheaper. The ECB responded by cutting its main lending rate to 0.25%. But if inflation weakens further the ECB may have to embrace radical remedies, such as setting negative interest rates on deposits that banks leave with it. Economist (England) Ed: Psst. If cutting interest rates haven't worked for years, stop cutting them and try something else. Such as linking gold to paper money. 3. ECB poised for battle to ward off deflation. Mario Draghi has signalled that he would be prepared for the European Central Bank to fight deflation in Europe by buying packages of bank loans to households and companies. Criticizing those who think QE is "magic," the ECB president said the EU treaty "prohibits monetary financing." The implication was that buying government debt directly from member states was illegal, though the central bank has already bought sovereign bonds from investors. The threat of a prolonged period of falling prices, as seen in Japan over the past two decades, is increasingly viewed as a big risk to the global economic recovery. Nowhere is considered more vulnerable than the eurozone, where inflation is less than half the ECB's 2% target. Claire Jones & Chris Giles, Financial Times (London), 27 Jan 14 Ed: "Battle" deflation? Not another war! Just linking currencies to gold would fix it. 4. One piece of the jigsaw puzzle is missing to complete the deflation landscape across the West: a slide in oil prices. Turmoil across the Middle East and Africa has choked supply over the past two years, keeping Brent crude near $110 a barrel, despite a broader commodity slump. US shale will add 1 million barrels per day (bpd) to global supply for the third year running: Libya will crank up shipments after a near collapse in 2013 and Iran will come out of hibernation. America is on track to overtake Saudi Arabia as the top global producer of oil by 2016. The US Energy Departments says US oil imports will drop to 5.5 million bpd by next year, half the levels a decade ago. This turns the world's 89 million bpd market upside down. Deutsche Bank said Saudi Arabia may have to slash its output by a quarter to 7.5 million bpd this year to stop the bottom falling out of the market. The Saudis no longer have such money to spare. They are propping up a welfare nexus to keep a lid on explosive tensions. This comes as Iran makes its peace with the West. President Hassan Rouhani has agreed to eliminate Iran's stocks of 20% enriched uranium. Iran will submit to daily inspections of its Fordo enrichment site. The first phase of the deal will come into force next week. Julian Jessop from Capital Economics says
more oil will start to come on to the market as the sanctions are softened. Meanwhile Libya may add 1 million bpd to global supply this year. Bank of America says a return of Iran and Libya could add up to 3 million bpd. Each 1 million bpd of this "positive supply shock" could shave $20 off the world oil price, unless Opec's fractious cartel slashes output quickly enough to offset it. We should expect hot words at Opec summits, and plenty of cheating. It is hazardous to make assumptions about Middle East politics, not least with the Shia-Sunni conflict spreading from Iraq and Syria to the whole region in what looks disturbingly like the onset of the Catholic-Lutheran showdown in Europe's Thirty Years War. The uprising by Sunnis in the Iraqi region of Anbar has revived fears of a full-blown civil war. Iraqi oil output has crashed to 2 million bpd for several months as al- Qaeda attacks the Kirkuk-Ceyhan pipeline. Yet the latest turmoil cuts both ways for oil prices. Any calming of tensions could lead to a rapid rebound in output. The growth of US "broad" M3 money has slowed to 4.6% even before Fed tapering cuts off stimulus. In the eurozone it has been near zero for six months. The latest data from China is very weak. China is riding a $24 trillion credit tiger that it cannot easily control. Fresh data shows that fixed investment surged to $5 trillion last year, more than in the US and Europe combined. This implies yet more excess capacity, transmitting a deflationary impulse worldwide. Half of Europe already has one foot in deflation, with prices falling over the past five months, once austerity taxes are stripped out. Ambrose Evans-Pritchard, The Daily Telegraph (England), 16 Jan 14 (Thanks to TDLr Elizabeth Hamilton, United Kingdom) 5. Most traditional TV networks have struggled to hold on to their audiences in recent years as competition intensifies, including online. But business television has faced the added challenge that individual investors are fleeing the stock market as an increasing amount of trading is done by institutional investors and algorithms, market experts say. By one measure, individual investors have pulled more than $1.17 trillion from the equity mutual funds tracked by research firm EPFR since the beginning of 2008. Keach Hagey & William Launder, Wall Street Journal, 3 Dec 13 Ed: Yet leading market averages have risen since 2009. This is an extremely rare bull market during an economic Depression. Such negativity is often the time to buy. By DITPON, the Dines Theory of Positive Negativism, (see Mass Psychology book, page 329). 3D PRINTING 6. Hundreds of small shops across the US are leveraging technology to meet demand for low volume, highly-customizable products. Other companies, such as Etsy and TechShop, serve as online marketplaces or starting grounds for tiny manufacturers to churn out new inventory in metal, wood and even fabric. Makers of dies and machine tools have increased employment by about 18% since August 2009, compared with a 2.9% gain for overall manufacturing. The growth in low-volume, high-variability production is catching the attention of companies such as Walmart Stores. Mom-and-pop operations are picking up manufacturing,
doing it in a highly flexible, highly local kind of way. This is something that's going to permeate through the whole manufacturing economy. We gave up on manufacturing too soon. The US has regained about 503,000 of the 2.3 million factory jobs lost in the aftermath of the 18-month recession that ended June 2009, according to the Bureau of Labor Statistics data. Specialty operations are finding new opportunities because of 3D printers. More than 58% of small shops added new machines for so-called additive technology in 2012, the third year of gains since the recession ended, according to Wohlers Report. A new army of entrepreneurs also is leveraging connectivity and 3D printing to create demand for manufacturing from the grass-roots. Some entrepreneurs are skipping the middleman and going into production themselves, said Brandi Tysinger-Temple, CEO and founder of Lolly Wolly Doodle, a children's clothing line in Lexington, NC, that gets many customers through Facebook. Because the equipment can be programmed. Ryan Lorenz, CEO of body jewelry maker Omerica Organic says he is devoting 20% of output to outside work. He can make products ranging from wooden parts for musical instruments to knives. Omerica Organic started in 2004 to make small wooden jewelry called plugs, used by customers to insert in their earlobes. There's a whole ecosystem being created and people are creating their own jobs in ways that are probably not even being counted. As technology such as 3D printing gets less expensive, it also can supplant manufacturers that don't adapt. A key tool is the MakerBot Replicator 2, a $2,199 3D printer that creates computer programmed shapes out of plastic (MakerBot owned by Stratasys). Jeff Green, Bloomberg News, 9 Nov 13 (Thanks to TDLr John Schloegel, Florida) Ed: Buy and hold our recommended 3D printing stocks. 7. Last spring, news that a functioning plastic handgun had been created using a 3D printer, and that the file for making the gun was available online, led several city and state legislators to introduce bills banning 3D-printed guns. However, 3D printers -- which create customized objects on demand, based on digital instructions -- are already widespread. Banning one type of 3D- printed object would be futile and could push 3D printing "underground," at the expense of important scientific and medical advances. Many 3D printers work somewhat like inkjet printers do, depositing layers of material that can be plastic, metal, or even living cells. Since the first demonstration of this technology in the 1980s, numerous 3D printers have come on the market, and more should be showing up within the next year as the original patents expire. "3D printing is not just a device, it's an entire ecosystem of contributing technologies that give new capabilities," said technology analyst Melba Kurman. 3D printers have been used to create keys that can open master locks. In theory, they could also be used to build advanced weapons or to counterfeit machinery parts intended to break and cause catastrophic failure. Some security solutions may come in the form of the technology itself. For example, Microsoft has demonstrated a method of embedding microbubbles within 3D-printed objects, in patterns that encode information. Such tags might potentially be used to trace the objects back to their source.
Science Ed: How might individuals printing their own guns affect society? GEOPOLITICS 8. As New Year approached a century ago, most people in the West looked forward to 1914 with optimism. Yet within a year, the world was embroiled in a most horrific war. It cost 9-million lives -- and many times that number if you take in the various geopolitical tragedies it left in its wake, from the creation of Soviet Russia to the too-casual redrawing of Middle Eastern borders and the rise of Hitler. Yet the parallels remain troubling. The United States is Britain, the superpower on the wane, unable to guarantee global security. Its main trading partner, China, plays the part of Germany, a new economic power bristling with nationalist indignation and building up its armed forces rapidly. Modern Japan is France, an ally of the retreating hegemon and a declining regional power. The most troubling similarity between 1914 and now is complacency. Businesspeople today are like businesspeople then: too busy making money to notice the serpents flickering at the bottom of their trading screens. Politicians are playing with nationalism just as they did 100 years ago. China's leaders whip up Japanophobia, using it as cover for economic reforms, while Shinzo Abe stirs Japanese nationalism for similar reasons. India may next year elect Narendra Modi, a Hindu nationalist who refuses to atone for a pogrom against Muslims in the state he runs and who would have his finger on the button of a potential nuclear conflict with his Muslim neighbors in Pakistan. Vladimir Putin has been content to watch Syria rip itself apart. And the European Union, which came together in reaction to the bloodshed of the 20th century, is looking more fractious and riven by incipient nationalism than at any point since its formation. Nobody is quite clear what will happen when North Korea implodes, but America and China need to plan ahead if they are to safeguard its nuclear program without antagonizing each other. China is playing an elaborately dangerous game of "chicken" around its littoral with its neighbors. Eventually, somebody is bound to crash into somebody else -- and there is as yet no system for dealing with it. A code of maritime conduct for the area is needed. The chances are that none of the world's present dangers will lead to anything that compares to the horrors of 1914. Madness, whether motivated by race, religion or tribe, usually gives ground to rational self- interest. But when it triumphs, it leads to carnage, so to assume that reason will prevail is to be culpably complacent. That is the lesson of a century ago. Economist (England) LATEST ON GOLD 9. Given the assumption that the dollar will depreciate and that the US government will issue far more debt to inflate its way out of its fiscal hole, investors from abroad are likely to seek to purchase more hard assets and fewer financial investments. Meanwhile, the Chinese government's concern with the riskiness of financial assets in the US is clear. It has already trimmed its purchases of the debt of the mortgage agencies Fannie Mae and Freddie Mac, as well as corporate debt and shares, concentrating its purchases in Treasuries alone. Moreover, China has not hesitated to communicate its displeasure with US policies and
politics. After the debt-rating downgrade earlier, China was vocal in noting that the country could no longer "borrow its way out of messes of its own making." In the past few weeks, China has also let its currency appreciate at a swifter rate. As that trend continues, assets abroad, especially in the US, will become ever more of a bargain. The perceptions of a creditor nation will always matter more than those of a debtor one. Over time China will target more US acquisitions and the US will just have to get used to it. The fact that beggars can not be choosers is true for nations as well as individuals. Henny Sender, Financial Times (London) Ed: Read 'em and weep. 10. Japan is on track to win its war on deflation with the latest consumer price inflation figures showing the highest reading since the country slipped into deflation 15 years ago. The figures suggest the country is on track to hit the 2% inflation target set almost a year ago and that monetary easing efforts are beginning to bear fruit. Jennifer Thompson & Ben McLannahan, Financial Times, (London), 1 Dec 13 Ed: "War on Deflation" could be won by balancing its budget and linking its paper currency to gold and silver. And how does Japan know inflation will stop rising at 2%, that might morph into an uncontrollable hyperinflation? Japan's deflation began in 1990, 24 years ago. TDL's "Sell" signal in 1989 still stands, if only because the nation is stuck in the Low State of Hyperneeding to be Right. LATEST ON THE COMING POLICE STATE (ORWELL'S "1984") 11. The National Security Agency has implanted software in nearly 100,000 computers around the world that allows the US to conduct surveillance on those machines and can also create a digital highway for launching cyberattacks. The NSA has increasingly made use of a secret technology that enables it to enter and alter data in computers even if they are not connected to the Internet, according to NSA documents, computer experts and US officials. San Francisco Chronicle Ed: No place for privacy in an Orwellian 1984. TPG 12. Americans enter 2014 with a profoundly negative view of their government, expressing little hope that elected officials can or will solve the nation's biggest problems, a new poll finds. Half say America's system of democracy needs "a lot of changes." The percentage of Americans saying the nation is heading in the right direction hasn't topped 50 in about a decade. In the new poll, 70% lack confidence in the government's ability "to make progress on the important problems and issues facing the country in 2014." A narrow majority say they'd do a better job running the country than today's leaders in Washington. Asked generally about the role of government in society, the AP-NORC Center for Public Affairs Research poll finds Americans divided on how active they want government to be. Half say "the less government the better." However, almost as many (48%) say "there are more things that government should be doing." Associated Press, 3 Jan 14 Ed: Such as resigning. HEALTH 13. This summer in Australia, beachgoers looking to avoid sharks
can just follow their activity on Twitter. Government researchers have tagged 338 sharks with transmitters that alert a computer when they swim within half a mile of a beach, NPR reported. The computer then sends out a Twitter message with the shark's location. You can follow their activity on the Surf Life Saving Western Australia account at @SLSWA. San Francisco Chronicle, 7 Jan 14 Ed: Hmpth. We could use some of those transmitters to detect approaching taxpigs. 14. A man missing his lower leg has gained precise control over his prosthetic limb, just by thinking about moving it -- all because his unused nerves were preserved during the amputation and diverted to his thigh where they communicate with a robotic leg. He can now seamlessly switch from walking on level ground to climbing stairs and can even kick a football around (see him in action at bit.ly/roboticleg). During traditional amputation, sensory nerves are severed and lose their function. They could preserve some of that functionality by rerouting sensory nerves and attaching them to another part of the body. The nerve signals were then available for a robotic limb. The procedure is called targeted muscle reinnervation (TMR). The robot leg already carries a number of mechanical sensors including gyroscopes and accelerometers, and uses information from these sensors for certain walking styles. Colin Barras, New Scientist Ed: Bless modern medicine. NOTICE As always, the press is welcome to excerpt brief quotes from TDL and IWB, but not our recommended stocks which are for paid subscribers only. Those who use our work without having paid for it are in the Low State of Stealing and, as a result, will find a way to lose money doing it. Please do not forward our work to cheaters, who will hear from our Legal Department. (c) 2014, James Dines & Co Inc. All Rights.
Interim Warning Bulletin, 21 Feb 2014, Vol 2014, #3 Leading stock averages rose last October, November and December in an uninterrupted Uptrend, but then dropped and broke Uptrendlines in January -- and have been rallying since 4 Feb 14. This normally implies a neutral Congestion Area forming, either to be a springboard for new highs, or a Top Formation. More on this in the next TDL, but for the moment choppy and lateral markets should be expected. Some economic mysteries are clarifying, and our latest take starts with a growing realization that business internationally continues to weaken, as politicians worldwide complain about the lack of sufficient jobs. There is also a growing unease about the geopolitical situation, but not yet a recognition that this is a World War. For the record, even now we have seen nothing about a coming World War anywhere else in the world's press. There are also comments in the mainstream press that the world is in a persistent deflation, explaining why flailing efforts to create inflation have been failing. Governments continue to print too much money and have lowered interest rates as low as they could realistically go, such that growing numbers of fearfuls have begun a flight to the safety of gold and silver. We had been puzzled that gold and silver mining shares were rising while not the actual bullions. It was because miners' costs were declining while commodity prices were firm, resulting in more profits for miners. Recent currency plunges in many nations lowered the domestic costs of mining companies in local currencies. Meanwhile, commodities produced are sold in stronger US dollars, so the spread between lower costs and higher selling prices improved the financial situation for mining stocks. Accordingly, stocks in the Raw Materials Sector have risen even while many other stocks have not fared as well. Some money is flowing into precious metals seeking "safe harbor" from alarming geopolitical developments: For example, we are frankly frightened by the proposed Saudi shipments of mobile anti-aircraft missiles to Syrian rebels. We might explore these themes in more detail in our upcoming TDL. Investors have sought refuge for some capital by investing in the stock market, albeit for those who could handle the risks. In that regard we are pleased to note that our stops on leading averages were not triggered by the latest market weakness, with the sole exception of the Nasdaq Composite, only because of an intraday dip two points below our stop. The fact that none of our other averages got stopped out induces us to reinstate the "Buy" signal with the new stop at 4,048. We have been encouraged by the spreading strength in the precious-metals arena. Gold and silver billions have improved markedly since our last IWB, and it might be recalled that we had spurned the precious metals rally last summer as a "bull trap," which indeed it turned out to have been, as the precious metals subsequently dropped to new lows. However, while the current rise has more authenticity to it, our reliable Technical Indicators are still mixed; we are nonetheless turning more bullish on them, albeit with some caution and properly-placed stops protecting positions where applicable. We added a gold stock (Agnico- Eagle) in the IWB of 27 Jan 14, and flashed a "Buy" signal on silver stocks (DISSA) in our IWB of 4 Feb 14. It is remarkable that it took so long for the Raw Material Sector to move up, five years
after leading averages made their lows in March 2009, but better late than never. Interestingly, it is not just the precious metals, but there is even strength to be found in the entirely-scorned uraniums for example, even though the price of uranium has not yet risen. We hereby celebrate the event by re-adding Cameco Corp (CCJ-US$21; CCO.TO-Cdn$23.53) to Supervised List #6, guarded by an initial stop at 18 (Cdn). The Rare Earths are also perking up, with favored Tasman having tripled from its low reached on 15 Apr 2013. Flinders, our entry in a steel industry recovery, has not yet risen, but should join the parade, by DIWPAT (The Dines Wolfpack Theory - Dinesism #10 in your Mass Psychology book, page 328). Meanwhile, the stock market continues to act well, having impressively absorbed the January selling wave, and several of our favorites are not only scrambling toward new highs, but some have even burst into new all-time high ground (see List #2, Stock #3,; List #2, Stock #4; List #4, Stock #1; List #4, Stock #3; List #4, Stock #5; and List #5, Stock #2.) Among the 3D printing stocks, List #1, Stock #5 is acting best, but we still think highly of the prospects of List #1, Stock #4. List #5, Stock #3 looks ready for an Upside Breakout. Trigger Box: Nasdaq Composite: New Short-Term "Buy" -- stop 4,048 -- and Intermediate-Term raise stop to 3,783. No other meaningful changes in our Trigger Box. Supervised Lists: The following changes to our six Supervised Lists are: List #1 : Upgrade Stock #1 to "Buy." List #2: Raise stop for Stock #3 to 28; upgrade Stock #4 to "Buy" and raise its stop to 61; lower stop on Stock #6 to 10.5. List #3: Upgrade all six stocks in List #3 to "Buy on dips"; raise stop for Stock #5 to 12; raise stop for Stock #6 (added by IWB of 27 Jan 14) to 27. List #4: Raise stop for Stock #1 to 1127; raise stop for Stock #3 to 69; raise stop for Stock #4 to 52; raise stop for Stock #5 to 72. List #5: Raise stop for Stock #2 to 28; raise stop for Stock #6 to 16. List #6: Upgrade Stocks #1 & #2 to "Buy," Downgrade Stock #4 to "Hold." Next TDL scheduled for 28 Feb 14. CONDENSED, SELECTED EXCERPTS FOR BUSY TDLRS: Latest on the Coming 1984 "Privacy is dead in the digital world that we live in. Unless you are comfortable putting that statement on a billboard in Times Square and having everyone see it, I would not share that information digitally." Michael Sutton, vice-president of security research at San Jose-based Zscaler, on news of documents leaked by Edward Snowden showing US and British agencies have infiltrated mobile software, seeking details about users' comings and goings and their social affiliations. San Francisco Chronicle, 30 Jan 14 Ed: Our privacy has been stealthily seized without compensation. Has anybody else read the 4th Amendment to the US Constitution we
used to have? HEALTH: Intelligent Parasites 1. At the Society for Integrative and Comparative Biology (SICB) an ecoimmunologist added to a growing catalog of parasites -- that manipulate the behavior of their hosts to improve their chances for survival and spread. Killifish infected with a certain flatworm flash their sides in the sun, attracting fish- eating herons, enabling the parasite to enter the avian stage of its life. And rats infected by the protozoan Toxoplasma gondii become less afraid of cats, the mammal in which the parasite actually reproduces. Another manipulative parasite -- a fungus that infects carpenter ants, causes an ant to leave its colony, climb a tree, chomp down on a twig or the underside of a leaf and die, freeing fungal spores to fall onto the ground, where they can reinfect new ants. Darwin's contemporary, Alfred Russel Wallace, described this fungus growing out of ants' heads in the mid-1800s, but not until 2009 did David Hughes, a Penn State behavioral ecologist, document the suicidal behavior it caused. Researchers say there are now too many examples to dismiss the role of parasites in animal behavior. Elizabeth Pennisi, Science Magazine, 17 Jan 14 Ed: We wonder whether the stock market manipulates us comparably. Flu 2. Cases of the new H7N9 avian influenza in China are surging alarmingly. There are now 300 confirmed cases, with more appearing every day. Roughly a quarter of the victims have died. The first human cases were reported only last March. By contrast, the H5N1 influenza virus, another lethal strain that jumped from birds to people, first appeared in 2003 and took almost five years to reach the 300-case mark. At the same time, an even newer avian flu in China has killed its first human victim. That strain, known as H10N8 has been confirmed in only two people. (Influenzas are described by the shapes of two protuberances on their surfaces: the hemagglutinin "spike," or "H," that attaches to cells, and the neuraminidase "helicopter," or "N," that chops off receptors, allowing new viruses to escape. There are 18 known types of H and 11 of N.) Birds appear to be spreading the H7N9 virus more through their breath than through feces, the normal infection route. Monitoring the spread of the H7N9 and H10N8 viruses is difficult because neither makes chickens sick. Although human-to-human transmission of the H7N9 virus has not been confirmed, there have been clusters of two or three cases within families. Donald G McNeil Jr, New York Times, 3 Feb 14 Sugar 3. Could too much sugar be deadly? The biggest study of its kind suggests the answer is yes. It doesn't take all that much extra sugar, hidden in many processed foods, to substantially raise the risk, and most Americans eat more than the safest amount. For someone who normally eats 2,000 calories daily, even consuming two 12-ounce cans of soda substantially increases the risk. The study appeared in JAMA Internal Medicine. Scientists aren't certain exactly how sugar may contribute to deadly heart problems, but it has been shown to increase blood pressure and levels of unhealthy cholesterol and triglycerides; and also may increase signs of inflammation linked with heart disease, said Rachel Johnson, head of the American Heart Association's nutrition committee. More than 30,000 American adults were
involved. In the new study obesity didn't explain the link between sugary diets and death. That link was found even in normal-weight people who ate lots of added sugar. Adults who got at least 25 percent of their calories from added sugar were almost three times more likely to die of heart problems than those who consumed the least -- less than 10 percent. Associated Press, 4 Feb 14 Ed: Sugar is a choice. GEOPOLITICAL 1. Thousands of Muslims tried to flee the violence in the Central African Republic's capital as crowds of angry Christians shouted "We're going to kill you all." France's former colony is mired in unprecedented sectarian fighting. Associated Press, 15 Feb 14 2. The foreign militants battling Malian and French troops across northern Mali are part of a little-noticed but hugely important shift. American policy makers have long treated the Middle East and South Asia as the main battlegrounds of the war on terror, but those regions are quickly being joined by Africa, which is now home to some of the largest and most active Islamist militias in the world. Malian jihadists with French passports could spread across the continent to strike European targets, as well as American embassies, schools, and military bases. Fears about Africa's emergence as a terror haven are unlikely to subside anytime soon. Africa's Islamists are able to take advantage of the fact that many of the continent's countries have porous borders; weak and corrupt central governments; undertrained and underequipped militaries; flourishing drug trades that provide a steady source of income; and vast, lawless spaces that are so large -- and so far away from major American military bases, like those in the Middle East and Afghanistan -- that it would be difficult for the US to mount effective counterterror efforts even if the war-weary Obama administration chose to do so. Those are precisely the reasons (along with a trove of Libyan weapons) Islamists were able to conquer northern Mali and use it as a base for planning the strikes on the uranium mine in Niger and the natural-gas plant in Algeria. Those are also the reasons American officials worry that a successful terror attack in the US or Europe planned in Africa and carried out by African extremists is only a matter of time. The new face of militant Islam, in other words, is likely to be an African one. The Tuareg, a light- skinned Berber people have been agitating for the creation of an independent state for more than 50 years. The Malian army had managed to put down previous Tuareg uprisings, in 1962, 1990 and 2007, but the uprising that began in February 2012 was very different. Thousands of young Tuareg men had served in the Libyan military during the long reign of Muammar Qaddafi. When he was deposed in 2011, the Tuareg fighters returned to Mali with mortars, anti-tank missiles, and other advanced weaponry that they'd looted from his armories. The US didn't see it coming and the Islamists conquest of the north put the White House in a bind. American officials believe that Mali's Islamists aren't yet capable of carrying out attacks in Europe or the US. The US is almost always reacting to attacks rather than trying to prevent new ones. In Yemen, for instance, the Obama administration didn't begin hammering al-Qaeda in the Arabian Peninsula with drone strikes until after the terror group came close to downing a packed passenger jet on Christmas Day and managed to sneak a pair of explosive-laden packages onto a cargo plane bound for Chicago.
The US has largely ignored Africa's Islamists for more than a decade. We keep doing so at our own peril. Yochi Dreazen, The Atlantic Magazine Ed: Yet another war that America is losing. And TDL's warnings that Africa is at risk are finally appearing in the mainstream press. 3. Nearly half a mile beneath the surface of the Pacific, southwest of Oahu, lie massive remains tied to a stunning tale from the last days of World War II and the first days of the Cold War that followed. Archaeologists using Pisces V, a manned submersible operated by the Hawaii Undersea Research Laboratory, found the wreck of I-400, a Japanese submarine remarkable not only for its size (400 feet long, twice that of a German U-boat), but also for its capabilities (it held three aircraft with folding wings that could be launched by catapult) and mission (its crew trained to attack the Panama Canal). Following the end of hostilities in the Pacific, the Allies had agreed to share military technology seized from Japanese forces. But I-400 and its sister vessels were simply too advanced and important -- the United States scuttled the ships rather than share their secrets with the Soviets. Samir S Patel, Archaeology Magazine, Mar/Apr 2014 THE COMING CURRENCY CRISIS 1. Nigeria's central bank pledged to convert almost a 10th of Nigeria's $43bn reserves from dollars to the Chinese currency. "Ultimately the renminbi is likely to become a global convertible currency," Kingsley Moghalu, the deputy governor explained. Only 0.1% of central bank foreign reserves are held in renminbi, compared with 60% in dollars and 25% in euros. Such forecasts have much to do with China's rising economic might and the gradual liberalization of its currency. But they reflect alarm and irritation about America too. The US current account deficit prompted economists and investors to warn of a looming dollar decline. Hence the keenness of Nigeria and others to reduce their exposure to the US currency and escape from being tethered to swings in American policy. But there is a paradox. While common sense would say that these developments should have sparked a dollar crisis, precisely the opposite occurred. Against a trade- weighted basket of currencies, the value of the dollar is little changed from 2008. And while the dollar's role as a reference currency has diminished in recent years (for example, because more oil is being priced in euros), it remains pre-eminent as a store of value. Foreigners continue to flood into American assets, buying 60% of all US debt issues since 2008, because America is recovering and the Federal Reserve is tapering its asset purchases, developments that support the dollar's value. But there is another reason that goes beyond economics: fear. In the past decade emerging market countries have amassed highly- rated government bonds as a defence against market turmoil. Regulators have pressurized western banks into doing the same. But there are now few genuinely safe assets. In a world where even US government debt no longer seems risk-free, asset managers have rushed toward the second-best option: a flight to liquidity, not safety. In that respect, America reigns supreme. Its capital markets are deep and the pool of dollars seems bottomless. The dollar turns the normal rules of economics on their head: the dollar has become ultra-attractive because of a bountiful supply, not because it has been constrained. Foreign investors will keep
gobbling up American assets. The sheer range of alternatives makes it difficult for any single currency to rival the greenback, a fact that the dollar's discontents do not like to acknowledge. Least of all amid emerging markets turmoil, which is likely to intensify the dollar rush -- and the paradox. Gillian Tett, Financial Times (London), 7 Feb 14 Ed: World-class reporting. 2. Argentina's government accused businesses of orchestrating speculative attacks against emerging-market currencies including the Argentine peso, as it injected more US dollars into the economy on Tuesday to try and calm nerves after last week's devaluation. Mrs Kirchner, attending a regional summit in Cuba, blamed Argentina's currency woes on banks, exporters and businesses. Other central banks in developing markets that have recently seen turmoil, such as Turkey and India, also intervened in their financial markets. Investors have worried over signs the US Federal Reserve will tighten its monetary policy, and China's slowing growth. But in Argentina, many economists say the economy has been hurt by high public spending, which has led to high inflation, an overvalued currency and a weakening trade surplus that threatens the government's dwindling supply of hard currency. Wall Street Journal, 29 Jan 14 Ed: Socialists keep "injecting" cash, creating more inflation, and rising prices -- and then blaming everybody else. The real culprits are socialist governments. Unless Argentina changes course, it is headed for serious troubles and a predictable revolution. WHICH WAY THE ECONOMY? 1. Europe's low inflation rate has become the new focal point for those who believe the euro zone is doomed to disaster. Inflation in the zone fell to just 0.8% in December, well below the European Central Bank target of "close to but below 2%." In Greece, inflation is already negative, while in Spain, Portugal and Ireland it ranges between 0.2% and 0.3%. That is fueling fears the currency area could tip into outright deflation, as Japan did in the 1990s when falling prices led to prolonged stagnation. Consumers held off purchases as they waited for goods to become cheaper, causing growth to stall and the debt burdens to rise. Wall Street Journal, 21 Jan 14 Ed: Would some TDLr in Japan please inform its leaders that deflation is a hangover from overprinting money in the 1980s? So printing much more money has prevented healing it? 2. The American economy is growing by about 2% a year, which is quite slow by historical standards of recovery. At this rate, it will take nearly three years before the unemployment rate reaches 5%. Rising inequality, particularly in America, has three interrelated main causes: first, the rise of information technology and its ever-growing role in work; second, a supply shortage of workers with the skills to adapt to change in the labor market; third, the weak rates of secondary school and university completion. Over the past 20 years, huge advances in IT have driven a sharp increase in demand for highly educated workers. This is true in many industries that were never before regarded as technology-intensive, such as real estate. This trend will only accelerate. Unfortunately, the supply of skilled American workers has been relatively flat for about 30 years. This is mainly because the average number of years of completed schooling has been stuck at roughly 12. The US was once the world
leader in secondary-school graduation rates but it now ranks near the bottom of OECD nations on this count. At university level it is still a leader in attendance but completion rates have fallen behind. Only half of students who enroll ultimately receive a degree. These weaknesses in education are a major cause of widening income inequality. Thirty years ago, full-time workers with a university degree earned 40% more on average than those who had only completed secondary school. In 2010, according to the US Labor Department, the difference was 83%. A postgraduate degree now leads to 300% higher earnings on average. These gaps also have been widening in European countries. Roger Altman, Financial Times (London) Ed: American education has failed miserably despite gargantuan amounts of money thrown at it, so Washington blames "capitalists" for income inequality. Education in US "Government schools" needs to be turned over to free-market capitalism. NOTICE As always, the press is welcome to excerpt brief quotes from TDL and IWB, but not our recommended stocks which are for paid subscribers only. Those who use our work without having paid for it are in the Low State of Stealing and, as a result, will find a way to lose money doing it. Please do not forward our work to cheaters, who will hear from our Legal Department. (c) 2014, James Dines & Co Inc. All Rights Reserved.
Interim Warning Bulletin 26 August 2015 VOl 2015, #9 Within one day after our last IWB flashing its "Sell" signal, stock markets worldwide plummeted precisely with the classic and violent Downside Breakout that we had been expecting. The accompanying excerpts summarize how the Mass Media has been reacting. Looking for someone to blame, we regard as nonsense scapegoating China's latest currency devaluations. Actually TDL gave China's currency little weight compared with other factors -‐-‐ yet we called the outcome correctly -‐-‐ so we'll stick with our own theories. Such vehement Downside Breakouts are usually followed by bear markets rather than mere Corrections, because they have a serious impact on Mass Psychology -‐-‐ or reflect their collective sentiment. Having sprung from out of the bushes while the wealthy were lazing in the late summer sunshine, the surprised shock usually needs Mass Fear to completely dissipate the previous Mass Greed. Granted, bonds had a knee-‐jerk rally, nonetheless we regard such strength as untrustable and therefore probably a trap, so we maintain our bearish stance on them. Mutual funds with record-‐low cash positions indicate that Big Capital was caught fully invested and, as the tide goes out, we'll soon see which money managers had been swimming without a bathing suit. Money managers must at least be in an early stage of Mass Fear, as leading stocks have not only taken the proverbial "haircut," but more like a scalping. Powerful forces have also been unleashed by the Downside Breakout to include governments, especially in America, which traditionally revs up its presidential campaigns around this time in the year before such elections. The din on television flogging candidates will next be unbearable until 8 Nov 16. Meanwhile The Herd is still mumbling incantations about whether the Fed would in September finally raise interest rates for the first time in a decade. Interest rate fluctuations have had no effect on prosperity so far, so only economists who are plain fools believe that hiking interest rates -‐-‐ probably by a measly 1/4 of 1% -‐-‐ would have any serious impact on the underlying realities. As proof, we predict the first thing governments will do with their so-‐called "toolbox" is to print more money and cut interest rates. Duh. Unfortunately interest rates are already so low that in some countries are actually below zero. The WEE (Washington Economic Establishment) would do anything other than admit that their crackpot Keynesian economic policies have been utter failures. They should soon at last, ask, "What do we do now?" That would be the beginning of enlightenment as it emerges from endarkenment, and the reply is "resign." It will be a crucial moment, comparable with individuals having achieved their life's goals but concluding they did not want the reward they had so assiduously sought -‐-‐ leading to the infamous "mid-‐life crisis" described in our High States book. The world's media needs to switch from the fanatic harping on the economic
impact on the world by tiny Greece, and shifting to China. Even now, the media is grudgingly accepting that China's economy is "slowing," blandly overlooking that only a month ago they were stuck in the "7% GDP growth" mantra about China -‐-‐ which TDL brushed aside as a "lie" by China's economists. Again, we part with the majority and insist that it is increasingly likely China's economy will suffer a depression. That is, unless it is handled with deep knowledge of the underlying realities. In other words, the truth. Especially about currencies. What should TDLrs do next? First of all, there should be an inviting "Technical Rally," if only because stocks are "Oversold." But the odds will be heavily against this rising right back up to all-‐time highs. If the rally occurs, the rally should fizzle out well below the all-‐time highs and then move to the next phase of the bear market. We carefully considered flashing a "Buy" in this IWB, but we are uncertain how high a rally might go and these are very "fast markets" untrustable for average investors. TDL instead chose the conservative path of waiting to see what governments and investors do next. We are by no means counting China out, if only because it has the world's largest reserves of foreign exchange (Forex), actually over $3.6 trillion. However internal debts are largely unknown, even to Beijing, although we suspect they are recklessly high, and we have been predicting a crash in the real estate and banking sectors that would radiate out of China to some of its neighboring countries. We are choosing to wait to see how that evolves, especially to study the shifting winds that should come next, with announcements by those who have had time to recover from the shock and declare their intentions. We have predicted that the next rally would be led by anti-‐hacking stocks. We are comfortable that we have prepared you well, holding cash and keeping in mind Dinesism #38 (DIRICHPOOR), "Rich or poor, it's good to have a lot of cash." TDLrs should feel free to quote us on that! The function of IWB is "insurance" against meaningful changes between TDLs, in this case updating the Trigger Box (below). TDL'S TRIGGER BOX (Hourly Prices for DJI) for Serious Market Students This is not intended to be advice for speculation in commodities futures. Updated by IWBs. All Super Major signals have been bearish since 2001, see DJI adjusted for inflation on page 40 of the 2015 Annual Forecast Issue (also in our TDL of 6 Aug 2015, page 15). Latest Stops DJI DJT DJU NASDAQ S&P 500 Short-‐Term: Sell Sell Sell Sell Sell Intermediate-‐Term: Sell Sell Sell Sell Sell 1. DJI: Still on Short-‐Term "Sell," although getting Oversold enough for a rally soon. The high for the year was reached on 19 May 2015, but if there is a decisive Upside Breakout to 18,500, then flash a new "Buy" signal with an initial stop at 18,000 until we have had a chance to reflect and respond. Intermediate-‐Term "Sell," but trigger
new "Buy" on rise to 19,000. 2. DJT: Still on Short-‐Term "Sell," with "Buy stop" at 8,910. Intermediate-‐Term "Sell;" "Buy stop" at 9,400. This is a confounding Top formation during a time of low fuel prices that has usually been bullish for Transports; we interpret our Sell, despite bullishly depressed fuel prices, as a negative sign for the overall market. 3. DJU: Still on Short-‐Term "Sell" flashed by IWB was a hole-‐in-‐one, within 1 day of its all-‐time high on 29 Jan 2015; repurchase at 620. Intermediate-‐Term "Sell"; repurchase at 640. July/August rally driven by those seeking perceived safety and income: should end soon. 4. Bonds: No changes. Historically overpriced, sell and run for your life. 5. NASDAQ Composite: Short-‐Term "Sell;" upgrade to Neutral on an unlikely rally to 5,300; subsequentially add initial stop at 4,300. Oversold enough to launch a rally. Intermediate-‐Term "Sell" triggered on the decline to 4,690 on 24 Aug 2015. Upgrade to Neutral on an unlikely rally to 5,300; initial stop at 4,300. 6. S&P 500: Short-‐Term "Sell" was flashed by IWB 19 Aug 2015, one day before the big market plunge started. Initial stop cover on an unlikely rise to 2,150. Intermediate-‐Term "Sell"; new "Buy" would be triggered by a rise to 2,200 with subsequent stop raised to 2,050. 7. Gold Bullion (London): Short-‐Term "Sell". A new "Buy" signal would be triggered by an unlikely rally to $1,300. Gold in US dollars has dropped more steeply than gold in other currencies, such as Euros, Swiss Francs, and Canadian dollars (see chart on page 11 of last TDL). It would now take an Upside Breakout at $1,400 to begin to shift percentages to much higher prices, but it would then advance quickly, so some golds and silvers are okay to maintain in long-‐term portfolios in case we miss the Bottom. The Intermediate-‐Term "Buy" signal was flashed at $919 on 15 Dec 2008; stop $920. Long-‐Term Super Major "Buy" was flashed at $288 on 25 Sep 2001; no stop yet. CONDENSED, SELECTED, INFORMATIONAL EXCERPTS FOR BUSY TDLRS LATEST ON CHINA: 1. A tumultuous fall in Chinese equities dubbed "Black Monday" by Xinhua, the official state news agency, triggered a ferocious sell-‐off in international markets yesterday as fear spread of the potential impact of slowing growth in China on the global economy. The market turmoil appeared to reduce the chances of the US Federal Reserve lifting interest rates next month and could even spur it to keep them on hold until 2016. Lawrence Summers, former US Treasury secretary wrote that raising interest rates would be a "serious error" that would threaten stability. The Shanghai Composite dropped 8.5 percent, its worst day since February 2007, after Beijing unexpectedly devalued the renminbi. Global stock markets have lost more than $5tn in value. Front Page, Financial Times (London), 25 Aug 15 Ed: Lost $5 trillion! See how TDL's "The Coming Great Deflation" contracts the money supply, to compensate for the previous overprinting of paper money -‐-‐ all as predicted.
2. China devaluation raises specter of currency wars. All currency wars are self-‐defeating for their combatants. When a country slashes the value of its currency to boost exports, it inevitably triggers competitive devaluations by its trading partners, thereby robbing the first mover of its initial advantage. China's position as the world's largest trading power ensures that its action will distribute deflationary pressures throughout its global supply chain, while intensifying pressure on competitors to seek their own currency depreciations. China's exports have been dismal so far this year and tumbled again in July by 8.3 percent. As ever, China's true predicament is obscured by official statistics. The official gross domestic product growth rate was 7 percent in the second quarter, but several independent analysts estimate that in reality it may be closer to 4 percent. Li Keqiang, premier, said that a scenario in which major economies "trip over themselves to devalue their currencies" would lead to a currency war. The devaluation could yet have unwelcome effects. It looks likely to amplify China's export of deflation by making Chinese goods cheaper. This is of concern because the producer price index, which measures aggregate prices at the factory gate, fell in July for the 40th straight month to minus 5.4 percent. This, coupled with the impact of potential competitive devaluations, looks likely to lead the world into another phase of slower growth. Financial Times (London), 12 Aug 15 Ed: At last, the world awakens to the truth about "The Coming Competing Currency Devaluations!" "Several"? We recall being quite alone predicting China's economy crashing, as recently as a couple of months ago! Now, some Analysts in the Low State of Hyperneeding Credit try to push to the front of the line. 3. Shares in some of the largest miners have fallen to levels last seen a decade ago, mirroring a downward lurch in commodity prices. The benchmark price of iron ore, key to steelmaking and one of the most important of traded mined commodities, fell 11 percent in just one day. The sector's fall underscores how tightly its fortunes are bound up with China, which became by far the largest consumer of mined commodities in the first decade of this century amid rapid industrialization, and supposedly set in train a natural resources supercycle. China still absorbs about half of iron ore, coal and copper exports, but the country's slowing growth since 2011 unleashed a severe downturn for miners by reducing demand for commodities. There was a positive demand shock caused by China on the way up, and now China is delivering negative demand shocks on the way down. Miners are struggling to cope with a strong US dollar, which has risen more than 20 percent against key currencies in the past year. This makes dollar-‐priced commodities more expensive for buyers using other currencies. There is a supply glut of certain commodities -‐ notably iron ore -‐ reflecting how projects started by miners during the boom years are now moving into production. Large companies such as BHP Billiton and Rio Tinto have made plain they are not willing to cede market share by reducing output. Shares in Anglo American sank to levels last seen in 2014. James Wilson and Neil Hume, Financial Times (London), 10 Jul 15 Ed: Finally, one of the first appearances in the press of China's "slowing growth" -‐ is a "severe downturn" like a crash?.
4. Global blue-‐chip companies have navigated choppy waters of late, enduring falling energy and commodity prices in conjunction with a rising dollar. Now another wave is rocking the boat: China. The country's economy, which has delivered relentless growth amid seemingly insatiable demand, has been slowing. Then this month the stock market rally ran aground, raising questions about the effect on China's economy and how this plays out globally. During this quarterly reporting season, the effect of a slowing China has been a prevailing topic with companies, including Caterpillar, Apple and Ford. The word "China" was mentioned in nearly half of 186 earnings calls conducted by S&P 500 companies from the start of June through to the end of last week. Caterpillar's construction arm was down 30 percent in the last quarter with much of that decline in China and Japan. According to FactSet economic estimates, real, year-‐over-‐year GDP growth in China is projected to be 6.9 percent, which would be a continuation of the declining growth seen in recent years. However, many investors suspect the true rate of growth may be lower, and it faces a potential hard landing given the huge build up in debt over the decade. Another sensitive area is companies associated with commodities. The Financial Times (London), 31 Jul 15 Ed: China's "continuation of the declining growth"? Who knew? You read it in TDL long ago. 5. Investors fleeing China find solace in India. With China's equity market convulsed by a sell-‐off, India finds itself the happy recipient of investment searching for safety in the developing world. Indian stocks are up about 5 percent. The rupee has also been relatively stable. The Financial Times (London), 29 Jul 15 Ed: Capital flight from China to India? Nobody foresaw it. 6. As forecasts predicting endless growth in China's appetite for raw materials became a matter of industry faith, mining companies borrowed extensively to build networks of pits, railway lines and port terminals. Mega-‐deals abounded as a merger-‐and-‐acquisition frenzy took hold. Cheap borrowing costs, thanks to low global interest rates, fueled the splurge. As China's hunger for resources ebb, mining companies profits suffer amid falling commodity prices. Metals such as copper and aluminum fell to near six-‐year lows. Iron ore at one point hit its weakest level for a decade. China accounts for about half of global steel production. Chinese steel consumption has waned. Rhiannon Hoyle, The Wall Street Journal, 13 Jul 15 Ed: Our prediction of a crash in the steel industry is at last perceived by the mainstream press. RAW MATERIALS: 1. The rout in commodities prices in recent weeks has been unrelenting, wide-‐ranging and driven by macroeconomic factors far beyond the ability of miners to control. The Bloomberg Commodity Index has returned to levels not seen since 2002 -‐ implying that the much talked-‐about "Commodities Supercycle," sustained by unprecedented demand growth by China's booming economy, is effectively over. The other negative is that the US Federal Reserve will raise interest rates later this year, further driving up the US dollar and sinking commodities priced in US dollars.
The Chinese central bank's gold holdings have grown 57% to 53.3 million oz gold since it last announced its holdings six years ago. Despite such growth, which places China as the world's fifth-‐largest holder of gold, many gold-‐bull Analysts over the years had speculated that the country's holdings had grown much more than that, and so the revelation was seen as gold-‐negative. John Cumming, Editorial, The Northern Miner, 3 Aug 15 Ed: Yes. CYBERSECURITY: 1. At a dinner in Menlo Park to discuss cybersecurity with the executives of top Silicon Valley firms, the mood was decidedly grim. Devastating cyberattack is likely to occur in the next five years, said a top Hewlitt Packard exec. Companies are nowhere near prepared for it. Neither are the Feds. What struck me about the dinner, attended by executives from Hewlett Packard, Cloudera and PayPal, along with academics and investors, was the naked pessimism about cybersecurity. It will get much, much worse. By 2020, the United States will be hit with a cyberattack that will cripple banks, stock exchanges, power plants and communications. An attack that will disrupt the daily lives of all Americans, not just people who carry a Target REDcard. Nobody really knows what to do. There are a lot of smart people in corporate America, Silicon Valley and the Federal government. But we're still pretty clueless about how to respond to a cyberattack. Buying antivirus software is one thing. A whopping 57 percent of CEOs have not been trained on what to do after a data breach. And more than 70 percent of executives think their companies only partially understand the risks. Hackers attack every day, every hour, every minute. Hackers range from well-‐funded state-‐sponsored networks to individuals who sit at home raising funds. Despite the recent headlines about cybercrimes, people just don't care. Sure, consumers get annoyed when they need to cancel credit cards and change passwords. But since banks and credit card companies typically cover losses from fraud, consumers lack a financial incentive to care about cyberattacks. Cybercrime will continue to remain a vague and distant threat. But if the pessimists are right, the American public won't have to wait long. Thomas Lee, San Francisco Chronicle, 21 Jul 15 2. After a wave of increasingly sophisticated cyber attacks, corporations of all types -‐ from entertainment groups like Sony to retailers, insurers, and even car-‐makers -‐ are spending big money to fight back against hackers. But the financial industry is the most frequent target, facing 300 percent more cyber attacks than any other sector. Regulators have noted that cyber attacks on banks are an emerging threat that could pose a systemic risk to the sector. The banking industry has poured hundreds of millions of dollars into securing its networks. They have hired thousands of the brightest tech minds, plucking former intelligence officials from spy agencies and combing the networks of the Chaos Computer Club, Europe's largest association of hackers, for recruits. The Financial Times interviewed top security officers at some of the world's largest banks, but none would speak on the record for fear of prompting reprisals from hackers. An attack on JPMorgan Chase exposed contact information of 76m households in 2014 -‐ a year when it spent more
than $250m and had about 1,000 people focused on cyber security. It shook customers' confidence in a system that holds personal financial information about their mortgages, savings and bank accounts. The 2013 breach of Target, the US retailer, is estimated to have cost banks more than $200m. Lloyd's, the UK insurer, has estimated cyber attacks cost all businesses as much as $400bn a year. Unlike other industries, the financial sector is required by US law to protect customer information. Most controversial is "hacking back" against cyber criminals, which is against US law and, according to several bank officials, a bad idea because of the difficulty in definitively identifying culprits. Instead, they are fighting back by bolstering their networks. The industry has also created a cyber-‐attack alert system with the Depository Trust & Clearing Corp, a clearinghouse. Data security experts in the financial industry commiserated about how their employers did not understand what they were dealing with. But people obviously get it now. Kara Scannell and Gina Chon, The Financial Times (London), 29 Jul 15 Ed: TDL is still hunting for a good buying opportunity on anti-‐hacking stock prices. CURRENT MARKET ANALYSIS: 1. Weak eurozone data underline fragile recovery. France stagnates while Germany, Netherlands and Italy underperform. Gross domestic product in the eurozone increased 0.3 percent. The eurozone is still struggling to recover from the economic crisis. Financial Times, 15 Aug 15 Ed: Tending to confirm our prediction that the 2008 crisis never ended despite all calling its aftermath a "fragile recovery". 2. The stark reality of the nation's growth numbers could not be more clear. The US's average postwar growth rate is 3.3%, and has often been higher. Across the entire 6½ years of the Obama presidency it has been about 2%, and often lower. The result is a populace that is becoming resentful, surly and anxious for a way out. Fewer than 30% think the country is on the right track, according to the Real Clear Politics polling average. A highly cited Wall Street Journal/NBC poll last year found that 76% of adults doubt their children will have a better life than they do. The Great Recession ended in June 2009, six years ago; in May, a Fox News poll found that 60% of registered voters think we are still in a recession. The labor-‐force participation rate, 62.6% last month, is at its lowest level in 38 years. In human terms, 432,000 people dropped out of the workforce in June, and nearly two million are called "marginally attached to the labor force" by the government. Why shouldn't people think we're still in a recession. After his 2009 economic stimulus of $831 billion produced so little, Barack Obama off-‐loaded responsibility for the economy to the Federal Reserve, which has repeatedly overstated its growth projections. Daniel Henninger, The Wall Street Journal, 30 Jul 15 Ed: Registered voters think the 2009 recession has not yet ended. WEE is oblivious, but the public correctly senses the truth – business could have been much better. 3. Emerging markets have now given back all their outperformance versus developed markets since they became winners on the back of Chinese stimulus in late-‐2008. Mining stocks in the FTSE World Mining index are back where they stood
at their lowest post-‐Lehman point. And inflation in Brazil has just passed 9 percent for the first time in more than a decade. Everything connected to commodities looks atrocious. Weakness in Chinese demand and a depressed growth outlook has trashed prices of major commodities, hitting miners. Economic and political cracks long covered up by easy profits from commodity production are being revealed as prices crash, with Brazil, Russia and South Africa all suffering. Investors are responding in the traditional way to a strengthening dollar: they are dumping emerging markets (EM) and slashing exposure to commodities. Collapsing demand from China, as it tries to switch away from heavy industry and infrastructure towards a consumer-‐driven economy, has hammered metals prices. The question is whether this has gone too far. At some point prices will overshoot, and it will be time for contrarians to step in. James Mackintosh, The Financial Times (London), 23 Jul 15 Ed: That time is "soon." TDL'S LATEST ON GEOPOLITICS: 1. Gazprom's gas production is on track to fall to a fresh post-‐Soviet low this year as the state-‐controlled energy group is buffeted by recession at home, declining demand in Europe and its dispute with Ukraine. Output at the world's largest gas company fell to the lowest level since Gazprom was established after the break-‐up of the Soviet Union. Gazprom last year accounted for 9 percent of total Russian budget revenues. Demand for its gas has fallen at home and abroad. Sales to Europe, the main driver of the company's revenues, fell against a backdrop of drastically deteriorating relations with the European Commission accusing the Russian group of abusing its position in the market. The recession in Russia has weakened domestic demand. Russia's economy contracted 4.4 percent in the second quarter from a year earlier. Ukraine -‐ which has been one of Gazprom's largest customers -‐ has sought other suppliers. Jack Frachy, The Financial Times (Moscow), 29 Jul 15 Ed: We note that lower sales of Russian gas have coincided with its subdued military moves against Ukraine. Oil money enables unnecessary wars. We would still not advise TDLrs to invest in Russia. 2. Russia sees a threat in its converts to Islam. While nations across Europe are grappling with the relatively recent peril of homegrown Islamic terrorists, Russia has long lived in fear of a jihadist uprising within its own borders, particularly in the Caucasus, where it fought two brutal wars to suppress Muslim separatists. For Putin's Russia, Slavic ethnic Russian converts to Islam pose an especially subversive threat, not only by stoking Russia's deep paranoia over separatists' extremism, but also by challenging the Orthodox Christian national identity that Putin has used to unite the country in place of Soviet Communism. David M. Herszenhorn, The New York Times, 2 Jul 15 Ed: Russia's real friends are in Europe not Asia, and we have often predicted would eventually unite with its westerners -‐ believe the unbelievable or not. 3. The Kremlin's agenda reflects Russia's bitter narrative of the recent past. Instead of welcoming it into the European family after the cold war, Moscow says Europe
and the US took advantage of its weaknesses to absorb its former allies, expanding the EU and Nato to Russia's doorstep. Financial Times (London), 6 Jul 15 Ed: Exactly what we recommended at the time, for daring NATO to include Russia! (See TDL Annual Forecast Issue, 14 Jan 94, pg 22). 4. The Arab world has been polarized for years in a worsening proxy conflict between Iran and gulf powers, particularly Saudi Arabia, fueling Sunni-‐Shiite tensions and stoking wars. In Syria, Iran's support has ensured the survival of President Bashar Assad against Sunni rebels backed by gulf nations in a devastating civil war, now in its fifth year. Yemen has been torn apart this year as Saudi Arabia, leading a coalition air campaign, has tried to help fend off Shiite rebels supported by Tehran. In Iraq, Saudi Arabia has opposed the growing power of Iran ever since the 2003 ouster of Saddam Hussein and the rise of a government led by Shiite politicians close to Iran. San Francisco Chronicle, 16 Jul 15 Ed: Media edging closer to admitting that a Sunni-‐Shiite civil war exists? 5. Prince Alaweed bin Talal, a Saudi royal, told us in November 2013 that "for the first time Saudi Arabian interests and Israel are almost parallel" over Iran. He all but said the Saudis could purchase a nuclear bomb off-‐the-‐shelf from Pakistan given the close ties between the countries. Prince Turki al Faisal, Riyadh's former intelligence minister, was even more blunt this march, saying the Kingdom "will want the same" nuclear technology Iran is granted in a deal. That would include a plutonium reactor and thousands of centrifuges enriching uranium. The Kingdom already has plans to build 16 nuclear reactors by 2030, claiming it needs them to power desalination plants. The temptation to develop a Sunni Arab nuclear deterrent will be overwhelming as a matter of national survival. The Wall Street Journal, 15 Jul 15 Ed: A nuclear arms race will soon emerge, believe the unbelievable or not. 6. For Greece, the gains from defaulting would be slight, and the costs potentially vast. Syriza, Mr Tsipra's hard-‐left party is anti-‐market and anti-‐enterprise. Neo-‐fascist Golden Dawn and the Communists, with a combined 12% of the vote, would thrive. The real task is to sort out the structural impediments to growth -‐ rampant clientelism, hopeless public administration, comically bad regulations, a lethargic and unreliable justice system, nationalized assets and oligopolies, and inflexible markets for goods and services and labor. The Economist (England) Ed: Time to revert to free-‐enterprise democracy? LATEST ON GOLD: 1. Texas decided to keep its gold holdings within its borders. Texas is the only state that owns an actual stockpile of gold -‐ not just gold futures or investment positions, but approximately 5,600 gold bars worth around $650 million. The holdings, stored at a New York bank, for some harken back to century old fears about the security of currency not backed by shiny bullion. The decision to bring its gold cache home was hailed by many conservatives, and even some on the far left, who are suspicious of national government. Associated Press Ed: Ignoring weak gold prices? The gold giant stirs.
2. The Shanghai Gold Exchange announced that it is planning on establishing a new physical gold price mechanism by the end of the year that will compete with London and US Comex. Unlike the US Comex, it will deal in direct physical gold sales rather than paper futures and derivative contracts. When the Shanghai Gold Exchange (SGE) opened in 2014 it set out to usurp the West's control over gold and their pricing of gold through paper markets. And in less than a year, the SGE has created the world's largest gold fund, and is now ready to take over pricing and price discovery for the monetary metal. In fact, sources claim that right now premiums on large sales of gold bullion are ranging as high as $600 over the current paper spot price. Examiner.com Ed: Gold will rise again. 3. Analysts say that any gold price below $1,100 an ounce will really sting, as that is the break-‐even cost for many miners. Miners have slashed exploration and capital spending significantly, and many have moved to sell less-‐profitable assets to raise cash. The low-‐cost operators will survive. Alistair McDonald, The Wall Street Journal Ed: There should be a gold Bottom Formation beginning one of these days, and the final gold boom will be the biggest of them all. TDL'S LATEST ON "THE COMING POTLUCK BOOM": 1. The commission to study marijuana legalization in California released a report with recommendations. We are not marijuana enthusiasts. We began this process not to extol the virtues of the plant, but out of a desire to do better than the status quo. The status quo is a thriving illegal market of cultivation and sales, with no protection for the environment, consumer or workers, and no tax revenue. The status quo is an under-‐regulated medical marijuana system where responsible cultivators and dispensaries exist alongside others just out to make a buck. The status quo is racial disparities in marijuana arrests and incarceration from a failed War on Drugs. And the status quo is youth using marijuana at rates greater than tobacco. Drug dealers don't card kids. The National Institute on Drug Abuse's annual survey for 2014 found that 34 percent of 10th-‐graders had already used marijuana, making the substance more prevalent among this age group than tobacco (23 percent). We expect to see a legalization measure on the 2016 ballot. Our report includes 58 recommendations for policymakers to consider before California decides to legalize recreational marijuana for production, sale and adult use. Gavin Newsom and Abdi Soltani, San Francisco Chronicle, 26 Jul 15 Ed: On the 2016 ballot, the topic will surely be publicly debated. And a new investment boom might merit another "Probing Attack." 2. With marijuana now permitted in some form in 23 US states, the usual flow of pot from south to north has slowed and, to a growing degree, reversed. This was never imagined as a benefit of Nafta. In Sinaloa, long the heart of Mexican pot production, farmers are ripping out marijuana planted on hillsides. "In our town, it's dropped because it's no longer a profitable business," says Mario Valenzuela. Participation in
a program that subsidizes farmers who plant crops like tomatoes or green beans instead of marijuana has increased 30 percent. He attributes the increase to the surge in US production since legalization. Marijuana seizures by US customs at California border crossings were half the amount five years earlier. Colorado weed carries such a cachet in both the US and Mexico that entrepreneurs say it could one day be a global brand. Mexico decriminalized possession of 5 grams or less of marijuana in 2009. A bill introduced last year would allow pot dispensaries like those in many US states. Momentum will grow if California approves recreational pot sales in a measure likely to appear on ballots in November 2016. The drug war isn't over. Yet there has been an historic change at the border. The fight can now focus on heroin and other deadly substances. Decades of prohibition never slowed the flow of pot from Mexico; legalization did. Bloomberg Businessweek Ed: A classic example of the Dines Nature of Paradox (DINOPA) -‐-‐ the War on Drugs might be won by surrendering to it, as drug dealers' profits go up in smoke. So to speak. 3D PRINTING: 1. Why 3-‐D printers scare Hollywood. From "Star Wars" guns to Warner Bros. toys, hobbyists are printing their own collectibles. After watching the trailer for "Star Wars: The Force Awakens" last April, Ken Landrum began building his own Stormtrooper gun. He used software on his personal computer to design nearly 40 separate pieces to be 3-‐D printed and assembled into a near-‐exact replica of the Walt Disney prop. "My goal is to make it better than the studio did." He has done it faster. Landrum posted photos of his design on a message board from 3-‐D printing enthusiasts some eight months before the movie premieres and five months before most official Disney toys hit shelves. Fans have filled his inbox asking for the files needed to print their own. Mr. Landrum recently decided to start charging $55 a file. The specter of digital piracy, which has wreaked havoc on the media business in the Internet age, now hangs over sales of physical products long considered immune to such forces. At this point, most of the printing is done by loyal fans who want to trade blueprints and products for free. But that is changing as more 3-‐D printers turn living rooms into mini-‐factories and piracy sites list 3-‐D files alongside illegally copied movies. The phenomenon is likely to go far beyond entertainment, he added, affecting everything from auto parts to coffee cups. The online marketplaces for 3-‐D printed objects resemble a Wal-‐Mart aisle full of comic-‐book heroes and well-‐known cartoon characters -‐ including "Shrek" statuettes, a recreated prop designed to resembled Angelina Jolie's headdress in "Maleficent," and a snack dish modeled after the "Star Wars" Millennium Falcon (lightsaber toothpicks included). Hobbyists peer-‐review designs until they arrive at a professional grade of precision and can respond faster than the studios to a product opportunity. The nascent market has the potential to eat into one of Hollywood's most important moneymakers. The tools needed to join the printing community are getting cheaper and more accessible by the day. About 217,000 3-‐D printers are expected to ship worldwide this year -‐ more than twice the number of units last year. That figure is expected to double each year between now and 2018, and cheaper models costing less than $1,000 are also becoming more prevalent. Free software can be used to design the schematics used
to print the objects. New printing technology lowers the barriers to entry for counterfeiting and makes it possible for anyone with a 3-‐D printer to be a counterfeiter. Erich Schwartzel, The Wall Street Journal Ed: We still envision great growth somewhere ahead to repurchase 3-‐D printing stocks. NOTICE As always, the press is welcome to excerpt brief quotes from TDL and IWB, but not our recommended stocks which are for paid subscribers only. Those who use our work without having paid for it are in the Low State of Stealing and, as a result, will find a way to lose money doing it. Please do not forward our work to cheaters, who will hear from our Legal Department. (c) 2015, James Dines & Co Inc. All Rights Reserved.
Interim Warning Bulletin, 9 June 2016, Vol 2016, #6 We have been gratified to observe the tremendous rise in the Raw Materials sector, led by golds and silvers. This is still a time to add to portfolios. Uranium has been one of the exceptions, overlooked and even shunned by investors, not only because of the dangers posed by nuclear power and disposal of waste. But also because it has been undercut by cheap natural gas and wind power. We have just completed our daily study of the uranium mining stocks and discovered Upside Breakouts all over the place! It is certainly counterintuitive for its bull market, although there are two positive considerations: First, it is very clean energy, and governments will have to include nuclear to meet their climate-change goals. Second, the pessimism toward Uranium stocks is so intense that that itself is bullish, based on DINOPA (The Dines Nature of Paradox). This IWB is a “Buy” signal for Uranium stocks, not uranium metal itself, yet – and our first selection is Fission Uranium (FCU.TO, FCUUF) because it has an outstanding deposit. Also, for an unknown reason, it has not yet been noticed by the crowd, as the price is lolling near its Bottom Formation at 66 cents a share. Add to Supervised List #6. Our initial instinct was to start with Cameco, an industry leader, but its chart is in a Downtrend and there are profits to be made elsewhere in the Uranium group. Additionally, more politicians nationally have been openly coming out in favor of legalizing medical marijuana, which we had expected would begin its bull market before the November presidential election – a prediction we reaffirm. Please see our recommended marijuana stocks in Supervised List #7 on page 15 of the last issue of The Dines Letter. The leading averages have risen to near the top of a long, flat trading range, as we expected. But the odds are that this Minor rally should stutter to a halt from somewhere around these levels, near where we flashed our “Sell” in December 2014. An Upside Breakout by the DJI or S&P 500 would impress us, particularly if the Dow Transports and NASDAQ averages confirm that new high. Else the new high might be a treacherous False Upside Breakout, which are almost always impossible to predict – but that’s our daring call. Our last issue contained the recommendations we thought would rise in a fulcral market decline, and there are no changes. Next TDL scheduled for 1 July 2016. An interesting excerpt as this goes to press: “Silver acting like ‘Gold on steroids,’ as assets reach record high.” Bloomberg Businessweek, 9 Jun 16 ED: TDLrs knew this first, and Wall Street is only beginning to catch up to you. But you’re still in the lead in having bought silvers. NOTICE As always, the press is welcome to excerpt brief quotes from TDL and IWB, but not our recommended stocks which are for paid subscribers only. Those who use our work without having paid for it are in the Low State of Stealing and, as a result, will find a way to lose money doing it. Please do not forward our work to cheaters, who will hear from our Legal Department. (c) 2016, James Dines & Co Inc. All Rights Reserved.