DOW THEORY STILL RELEVANT?

How many investors follow the Dow Jones Transportation Average?

It's supposed to be a leading indicator. In January it breeched new territory. Two months later the DJIA hit an all-time high.

The late Marty Zwieg, a renown investor in his own right, gained fame with his "Don't fight the tape!"mantra. The tape so far this year has been more directional than a one-way street sign.

Richard Russell, the publisher of the Dow Jones Theory and a longtime market follower, is the most noted proponent of Dow Theory. In early March Russell suddenly turned bullish after the DJIA hit a new high and urge his followers to invest.

Less than a month earlier he was decidedly bearish when he told his readers:

According to classic Dow Theory, the primary trend of the market can not be manipulated. Further, according to classic Dow Theory, the movements of one Average, unconfirmed by the other Average, are useless as a guide to direction, and are more than likely to prove deceptive.

Russell over the years has made some decent calls. But like the rest of us he's been incorrect too. As Mark Hulbert, publisher of Mark Hulbert Digest, a service that tracks market newsletters, recently wrote:
http://blogs.marketwatch.com/thetell/2013/03/12/how-bear-richard-russell-stopped-worrying-and-learned-to-love-the-dia/

The point here is how relevant is the Dow Theory given the changes  in the economy and even the make-up of the Dow components? The idea behind it is that the DJIA needs to make a new high and then be confirmed by the DJTA. 

The reverse is also true when confirming true bear markets. That translates into, as one market veteran noted, a possible time delay since a second indicator must show up to confirm the first.

Compared to the transportations and industrials, much of today's economy centers on banking and technology, two components that serve more as economic drivers than they once did.

Is Dow Theory still relevant?

MID-MORNING READ

Investors have been watching Japan to see what the BOJ would do about creating some inflation to turn their long-suffering economy around now that a new man is on the job.
http://www.marctomarket.com/2013/04/three-suprises-before-boe-and-ecb.html#more

THURSDAY READS

THE COST OF IT ALL
http://blogs.marketwatch.com/thetell/2013/04/03/big-macs-beers-and-the-search-for-global-bargains/

ZIP UP YOUR ZIP CODE WHEN SHOPPING
http://bucks.blogs.nytimes.com/2013/04/01/why-retailers-ask-for-your-zip-code/

BANK OF JAPAN TO BUY MORE BONDS
http://www.reuters.com/article/2013/04/04/us-japan-economy-boj-idUSBRE93216U20130404

TIMING, ISCKY ICKY TIMING BROUGHT ME TO YOU
http://blogs.marketwatch.com/thetell/2013/04/03/bill-gross-im-not-a-great-investor-warren-buffett-may-not-be-either/

EMERGING MARKETS STAGFLATION
http://www.marctomarket.com/2013/04/stagflation-lite-in-some-emerging.html

KRUGMAN  PINOCCHIO ECONOMIST
/http://news.investors.com/ibd-editorials/040313-650385-california-recovery-not-what-paul-krugman-claims-it-is.htm?p=full

A MOST IMPORTANT READ
http://www.testosteronepit.com/home/2013/3/24/economic-lessons-from-a-mexican-taxi-driver.html

MISCHIEF, MASSIVE POWER AND HEROIN

Peter Lynch once said something to the effect about new restaurants that depended on liquor sales for much of their revenue: The food better be good because liquor tastes the same everywhere.

For some who might not recall or know, Lynch was one of the rock star mutual fund managers at Fidelity in the 1980s who walked away early.

Stride through the halls of any pantheon dedicated to modern-day money managers and look up. You'll see Lynch's name.

Easy money policy and liquor are fungible. With the Bernanke-led Federal Reserve it's heroin, not liquor. 

http://www.marketwatch.com/story/stockman-fires-back-at-krugman-critics-2013-04-03?pagenumber=2

WEDNESDAY READS

CHEAPER GAS LURES BUSINESS
http://www.newsmax.com/US/natural-gas-europe/2013/04/02/id/497412

HOUSING MYTHS
http://blogs.wsj.com/economics/2013/04/02/three-myths-about-housing-market-rebound/

SOME TEX-MEX
http://news.investors.com/business-the-new-america/040213-650058-chuys-tex-mex-restaurant-beyond-texas.htm

THE BAILOUT PLAN
http://oilprice.com/Latest-Energy-News/World-News/What-Happens-to-Cypruss-Natural-Gas-with-the-Current-Bailout-Plan.html

ETHANOL FRAUD
http://www.thefiscaltimes.com/Columns/2013/04/03/Ethanol-Fraud-and-Why-You-Pay-More-at-the-Pump.aspx#page1

SILVER SLIPPING
http://www.futuresmag.com/2013/04/02/silver-falls-as-investors-shift-into-equities?ref=hp

CHEAT IF YOU CAN
http://www.guardian.co.uk/world/2013/apr/02/jerome-cahuzac-france-offshore-account

MUCH OIL LITTLE RELIEF

Ever hear of RINS?

Renewable identification numbers. No, this isn't about some government internment camp, though one might argue that depends on your definition of government mandates.

RINS, according to many who closely follow the oil industry, are in part responsible for why abundant oil supplies have failed to show up in lower gasoline prices at the pump.
Gasoline prices are up over 10% in 2013.

In case you haven't been watching, the US this year for the first time since 1994 will  produce more oil than it imports. But hold on a second. It gets even more interesting. In 2011, as noted in a recent Bloomberg article, "the US quietly surpassed Russia as the largest exporter of such refined products as gasoline and diesel. Canada's fuel imports from the US jumped 15 percent in 2012. Brazil's demand for US-made fuels rose 6 percent."

There's a similar increase in demand from China, India and oil-rich Venezuela. "Without recognizing it," the article states, " US drivers are competing with consumers in Latin America and Asia, where demand is rising."

This past month the US shipped "a record 3.2 million barrels a day of refined fuel" out of the country. Steven Schork, president of a Pennsylvania energy consulting firm Schork Group, was quoted in the Bloomberg piece:

"The US has the most sophisticated network and the most technologically advanced refining system in the world, and it has access to a tremendous amount of domestically produced crude oil in a country where demand is stagnant at best."

A while back we wrote about states like Oregon starting to tax hybrid car owners because many states are technically bankrupt and revenue from gasoline taxes have suffered a big hit. Drivers are filling up less and driving fewer miles in part owing to those hybrids the environmentalists and government bureaucrats in their save-mother-earth zeal fronted for.

Well, those same suspects pushed for another save-mother-earth goodie, ethanol. Forget the fact that ethanol comes from corn and half the farm acreage on the planet, if these folks have their way, will be growing the stuff. Nearly every gallon of gas sold in the US must be 10% ethanol.

 Not bad if you live in Iowa and grow subsidized corn. Instead of organic labels why not subsidized ones. This product is subsidized by American taxpayers. Maybe that would help wake the sleeping masses up to what's going on.

In the meantime, the ethanol tax, and that's what it is, tacks on in some cases 10 cents a gallon. But that's only half the story. Legislators when they pass laws make assumptions. In this case, demand for gasoline would remain high. It hasn't.

For 2013 the ethanol decree requires US refiners to blend nearly 14 billion gallons of ethanol in gas sold to you and me. Bottom line: too much ethanol. Refiners don't need all that mandated ethanol, a 400 million gallon difference. To offset it refiners must buy credits or RINs. But not without some pain.

Those credits or RINs, owing to the fall in gasoline use or demand, started the year selling at 7 cents, jumped to a buck by March and currently trade around 66 cents. For refiners selling their products abroad it's a no- brainier. They avoid US ethanol mandates.

Last and even more ridiculous is something called the Jones Act. Enacted in the 1920s  it requires "any cargo shipped between US ports to be carried by vessels that are based in the US, made in the US, and crewed by US citizens." Passed to protect US shipping interests, it's made it more expensive to move hydrocarbons between  American ports.

Though some might call it poetic hydrocarbon justice, the Northeast, after a series of refinery closings the last few years, faces higher energy costs because of it. Some say it adds $6 to $8 a barrel to transportation costs, making it much cheaper for a Gulf Coast refinery to ship gasoline out of the country than to the Northeast.

VILLAINS AND THE MEDIA

I was watching the news the other night.

Now if you don't know you should. By the time a story makes the six o'clock or late night news it's older than an issue of last year's People magazine. And usually about as boring.

As is routine for MSM the local station had the requisite young, attractive, ethnically correct, late-twenty something male and female anchors. Well attired, fairly polished and energetic. Like most slicker-than-slick food packages these days, they were gluten-free.

The story centered on how much sugar, that is, grams of the sweet stuff, is in food and how fat we Americans have all become. In case you don't realize it, villains are a prerequisite. Without them who needs heroes?

The trouble with villains is they come in all sizes and shapes and sport their own packaging. So a good part of media time is about those dastardly villains we all love to dislike and sometimes hate.  

When the stock market takes a swoon for the worse, it's those nasty short sellers. If a currency gets debased in the back alleys of some forex trading den, it's those greedy hedge funds. And don't bring up bankers and corporate chieftains with their gluttonous bonuses.

The term gluten in Latin means glue. Who the hell dared put that vile stuff in our sustenance?  So what if it pumps up bread and increases shelf-life, two features usually the private reserve of politicians.

Keeping your money locked up in anemic-yielding saving and checking accounts in the face of economic slowdowns in the eyes of many is a villainous act.

Forget Oklahoma, villains are the reason God made legislators. And if you are not diligent the next villain they turn up could be you.

The sugar story is an old one That it's just now making it to your local media proves the point. People like Adele Davis and William Dufty railed against its harmful effects in the 1970s. Dufty in 1975 published his now classic, "Sugar Blues."

Critics of Davis, and she had many, what most of us get when we step on establishment toes, will cite her court cases involving the deaths of some children whose parents followed some of her homeopathic prescriptions.

Let's set the record straight. One person in the US dies everyday from penicillin reactions. That's over 300 per year and it's only one of hundreds of patented medicines people ingest every day. Penicillin was discovered in 1928 by Sir Alexander Fleming and came on the market after World War II. At one time the number of annual deaths was much higher.

Davis also spoke out against saturated and hydrogenated fats long before it became acceptable to do so by the establishment. If those fats are not important today why is nearly half the US adult population over 45 on statins? 

If it isn't science, then it must be profits. For the record the diabetic problem the media and social do-gooders like Mayor Bloomberg rage about, mostly Type 2, the acquired kind, is a $35 billion industry.  It's common today to see Type 2 diabetics on two or even three oral hypoglycemics. There is even a pill for so-called pre-diabetics.

The unspoken mantra of big pharmaceuticals is: You got a problem, we got a pill. This isn't a ban or taxing over-sized portions issue. It's an individual responsibility issue, clear and simple, two basic concepts politicians and MSM have an extremely difficult time comprehending.

After all villains are much easier prey.

TUESDAY READS

BULL MARKET: WHICH STAGE ?
http://www.minyanville.com/business-news/markets/articles/The-6-Stages-of-Bull-Markets/4/1/2013/id/48996

CAFFEINE ADDICTION SPREADS
http://www.sciencedaily.com/releases/2013/03/130327133523.htm

NEW JAPANESE CENTRAL BANK CHIEF SPEAKS
http://www.reuters.com/article/2013/04/02/us-japan-economy-boj-idUSBRE93100M20130402

CHINESE CONSUMERS AND PRICE
http://www.minyanville.com/sectors/global-markets/articles/Pricing-Right-to-Win-Chinese-Consumers/3/27/2013/id/48956?camp=syndication&medium=portals&from=Fool

PLAY IT AGAIN WALL STREET
http://www.moneynews.com/newswidget/Wall-Street-synthetic-Richter-shipping/2013/04/01/id/497165?promo_code=10907-1&utm_source=10907Financial_Content_Network&utm_medium=nmwidget&utm_campaign=widgetphase1

FEWER DRUGS
http://www.pharmalive.com/drugmakers-are-licensing-fewer-compounds

SUCCESSFUL IS AS
http://blogs.hbr.org/cs/2013/03/the_most_effective_strategies.html?utm_campaign=Socialflow&utm_source=Socialflow&utm_medium=Tweet

MONETARY MISCHIEF

It is simple to state how the money supply is so centrally controlled. It is hard to believe. I have personally observed that non -economists find it almost impossible to believe that twelve people- out of nineteen--none of whom have been elected by the public--sitting around a table in a magnificent Greek temple on Constitutional Avenue in Washington have the awesome legal power to double or to halve the total quantity of money in the country.

The exercise of this arbitrary power has sometimes been 
beneficial. However, in my view, it has more often been harmful. The Federal Reserve System authorized by the Congress in 1913 and beginning operations in 1914, presided over the more than doubling of prices that occurred during and after World War I. It's overreaction produced the subsequent sharp depression of 1920-21. After a brief interval of stability in the 1920s, it's actions significantly intensified and lengthened the great contraction of 1929-33. More recently, the Fed was responsible for the accelerating inflation of the 1970s--to cite just a few examples of how it's power has been used.

The above quote is from Milton Friedman's 1994 book Money Mischief Episodes in Monetary History.

CURRENCIES

Here is a link to some currencies. Pay particular note to the last two paragraphs about China and Brazil. The implications for the yuan and the dollar should never be too far down on your investment radar. http://www.cnbc.com/id/100604785