The Wall Street Greek blog is the sexy & syndicated financial securities markets publication of former Senior Equity Analyst Markos N. Kaminis. Our stock market blog reaches reputable publishers & private networks and is an unbiased, independent Wall Street research resource on the economy, stocks, gold & currency, energy & oil, real estate and more. Wall Street & Greece should be as honest, dependable and passionate as The Greek.
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Tuesday, May 10, 2016
The Saudi Arabia Oil Minister Shuffle is Important
The announced change of Saudi Arabia's oil minister over the weekend is important to oil prices and the outlook for the energy complex. However, figuring out exactly how the change will play for oil prices is more complex than it might seem. That much should be apparent after the volatility of oil on Monday. Though, we should not simplify the matter, as other factors are playing importantly for oil as well. See the whole story on Oil Prices - The Saudi Arabia Oil Minister Shuffle is Important.
Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only. Article interests energy investors including Exxon Mobil (NYSE: XOM), BP (NYSE: BP), PetroChina (NYSE: PTR), Petrobras (NYSE: PZE), Royal Dutch Shell (OTC: RYDAF.PK), Total (NYSE: TOT), Chevron (NYSE: CVX), Repsol (OTC: REPYY.PK), ConocoPhillips (NYSE: COP), Eni SpA (NYSE: E), Sasol (NYSE: SSL), Encana (NYSE: ECA), Suncor (NYSE: SU), Imperial Oil (AMEX: IMO), Statoil (NYSE: STO), Cenovus (NYSE: CVE), Transocean (NYSE: RIG), Penn West Petroleum (NYSE: PWE), Continental Resources (NYSE: CLR), Noble (NYSE: NE), Concho (NYSE: CXO), Diamond Offshore (NYSE: DO), Ensco (NYSE: ESV), Whiting Petroleum (NYSE: WLL), Nabors (NYSE: NBR), Pride International (NYSE: PDE), Helmerich & Payne (NYSE: HP), QEP Resources (NYSE: QEP), Enerplus (NYSE: ERF), Rowan (NYSE: RDC), Cobalt (NYSE: CIE), Patterson UTI (Nasdaq: PTEN), SandRidge (NYSE: SD), Schlumberger (NYSE: SLB), Halliburton (NYSE: HAL), National Oilwell Varco (NYSE: NOV), Baker Hughes (NYSE: BHI), Weatherford International (NYSE: WFT), Cameron (NYSE: CAM), FMC Tech (NYSE: FTI), Oil States International (NYSE: OIS), Superior Energy (NYSE: SPN), Carbo Ceramics (NYSE: CRR), Helix Energy (NYSE: HLX), Pioneer (NYSE: PXD), CNOOC (NYSE: CEO), China Petroleum and Chemical (NYSE: SNP), Ecopetrol (NYSE: EC), Canadian Natural Resources (NYSE: CNQ), Apache (NYSE: APA), Anadarko (NYSE: APC), Devon (NYSE: DVN), EOG (NYSE: EOG), Chesapeake (NYSE: CHK).
North Korean Nuclear Threats Drove Gold Higher, Really?
Gold was surging Monday morning, despite a slew of tangible reasons for it to fall. Only one factor weighed significantly in its favor today, another random threat by North Korea to wage wide scale and unconventional warfare on the U.S. and its allies. To that I must ask, really? Investors are clearly fast to buy gold after the long-prolonged oversold state and slow to sell it, but as I’ve suggested in my Sell Gold series, that should change soon. See the full report on how North Korea affected the price of gold this week.
Raise Cash Now as a Precaution to Significant Terrorism
ISIS marks Christians with the Arabic symbol for Nazarene
In a recent article, I suggested investors should look to leverage volatility over the next three months due to a historical trend around first Fed rate hikes. In early August I suggested investors raise cash levels, stop buying dips in stocks, and take volatility instrument interests ahead of what I foresaw would be an imminent market correction. Today, as a precautionary measure for what I see as a high probability of terrorism and risk of severe disruption to securities, I am again suggesting investors have cash stores at the ready. Such stores of cash will allow investors to buy stocks at discount on any event driven weakness, and in doing so, preserve and protect portfolio performance. This is not an all out sell suggestion, as the Santa Claus rally is underway just as we predicted it would be. Stocks should continue to surge higher through the first half of January barring any significant terrorism or other disruption. However, entering the next week or so without volatility hedges and cash stores in place is simply negligent and irresponsible investment behavior.
Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.
I apologize for this report reaching my followers this late, as it was authored and submitted for publishing elsewhere on Thursday. Unfortunately it was not published despite my insistence due to the hot button topic that is terrorism and the normalcy bias. However, I believe many of us understand that this is a real risk to securities, and so I must ensure it reaches you.
5-Day Chart of SPDR S&P 500 (NYSE: SPY)
The charts are similar across the sectors of the market this week.
Market Sector Securities
Last Week Thru Wednesday
SPDR S&P 500 (NYSE: SPY)
+3.0%
SPDR Dow Jones (NYSE: DIA)
+2.8%
PowerShares QQQ (Nasdaq: QQQ)
+2.5%
iShares Russell 2000 (NYSE: IWM)
+3.0%
Vanguard Total Stock Market (NYSE: VTI)
+3.0% *
*Adjusted for dividend
The Santa Claus rally is underway (as we expected), and I am participating in it. My long stake in the energy sector shows confidence in the rally, but at the same time I have serious concern about a potential disruption to it. During this period where investors are buying the worst beaten securities and their favorites for 2016, there could be a near-term setback. Though, the worst beaten should take a lesser hit in such a scenario.
The risk of terrorism is not just a geopolitical or social concern. It poses a threat to our investments in securities markets, and so it is worthy of discussion in this forum. I will not get into the details of the various possible threats against us, but I must note some important aspects of terrorism and the spectrum of its potential impact. We have seen in the past that certain geopolitical events can actually serve U.S. securities. For instance, when the attack occurred in Paris, demand for U.S. treasuries increased due to a flight to quality to American risk assets; gold appreciated immediately thereafter but only momentarily due to strength in the dollar. So that means if terror attacks are concentrated to overseas locations, U.S. securities face less risk relatively speaking.
However, if attacks occur in the U.S., there is a greater danger to U.S. investments given the threat to America, the economy, dollar and companies that operate here. It’s also important to note that the scale and location of attacks play a role on financial securities as well. For instance, far reaching attacks or a series of attacks, for instance to a mall or malls (everyone shops) or to Wall Street or banks (most Americans save and/or invest) is far more threatening than an isolated attack. However, isolated attacks on high profile locations like New York City or Washington D.C. carry far more terror-factor than attacks to suburban locales. The reason for that should be clear; an attack on America’s largest city puts fear in the hearts of all city dwellers. Also, major media reacts in a greater way to issues at their doorstep. Also an attack on our nation’s capitol feels like an attack on all of us. Finally, catastrophic attacks of any sort are catastrophic for our investments. The enemies of America are well aware of these things given their focus of attention.
Risk is heightened now because the potential perpetrators of terror are religious fanatics. Christmas represents to them one of the most important of heretical celebrations of their enemies. New Year’s Eve is likewise high profile because it is celebrated worldwide. As a result, the next week or so, given that it includes Christmas and New Year’s, is perhaps the highest risk period for investors globally. Given the predominance of our Times Square celebration, and the specific threats of ISIS to New York and Washington, it is simply negligent to not be prepared for the possibility.
That means it makes sense to take temporary stakes in volatility hedges like the iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX) and/ or other similar instruments, similarly to what we did in early August. These can serve to protect portfolios for very short periods of time. It is important to note that these are short-term instruments to be sold on their significant appreciation or the passage of the risk period. I would go so far as to say they are only appropriate for sophisticated investors who understand their risk and can bear it.
Otherwise, for the rest of us, it is wise now to have cash stores at the ready to buy securities on any decline following an event. I would not sell gold interests to raise cash, as gold and its proxy securities like the SPDR Gold Trust (NYSE: GLD) should in my opinion appreciate in the event of terrorism, and perhaps even if the U.S. is not targeted. If you do have tax losses available to take and to mark against gains or income for the current tax year or even beyond that, you might do so now. Keep in mind that the best time to do that was probably a month ago, and that these securities are likely to rise now in many instances. As a result you might take a little from each holding to maintain interests while also raising cash. Or you might simply send more cash into your brokerage account so that it is ready for use to buy stocks at discount.
In a worst case scenario, we can expect a correction to securities markets, Santa Claus rally period or not. So while many of us are participating in the rally and are looking forward to January, we should not be ignoring this very serious risk. Thus, I suggest taking some time now to ensure you have cash in your brokerage accounts at the ready to buy securities at discount if God forbid something bad happens. Buying securities at severe lows on disruptive macro drivers serves outperformance and covers up many mistakes for those of us seeking alpha and perhaps not finding the best of it. I cover the markets regularly and invite relative interests to follow my Wall Street Greek blog and my column at Seeking Alpha. Follow me on Twitter at www.Twitter.com/WallStreetGreek and at Facebook via www.Facebook.com/WallStreetGreek. Join my email list by emailing me at WallStreetGreek @gmail.com.
DISCLOSURES: Kaminis is long VXX and long GDX mentioned in the article. Article may interest Northrop Grumman (NYSE: NOC), Raytheon (NYSE: RTN), Alliant Techsystems (NYSE: ATK), Lockheed Martin (NYSE: LMT), Boeing (NYSE: BA), NYSE: IWM, NYSE: TWM, NYSE: IWD, Honeywell (NYSE: HON), General Dynamics (NYSE: GD), Rockwell Collins (NYSE: COL), Goodrich (NYSE: GR), L-3 Communications (NYSE: LLL), SAIC (NYSE: SAI), FLIR Systems (Nasdaq: FLIR), EMBRAER (NYSE: ERJ), Spirit Aerosystems (NYSE: SPR), BE Aerospace (Nasdaq: BEAV), TransDigm Group (NYSE: TDG), CAE (NYSE: CAE), Hexcel (NYSE: HXL), Esterline Technologies (NYSE: ESL), Teledyne Technologies (NYSE: TDY), Curtiss-Wright (NYSE: CW), HEICO (NYSE: HEI), Triumph Group (NYSE: TGI), Orbital Sciences (NYSE: ORB), AAR Corp. (NYSE: AIR), Kaman Corp. (Nasdaq: KAMN), AeroVironment (Nasdaq: AVAV), Smith & Wesson (Nasdaq: SWHC), DigitalGlobe (NYSE: DGI), GenCorp (NYSE: GY), Hawk (AMEX: HWK), LMI Aerospace (Nasdaq: LMIA). Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.
Sometime recently I came across a curious story in the Wall Street Journal that I felt had no right to be there. Its mere presence in print said something to me, that it had a purpose. In its article, Spy vs. Spy: Inside the Fraying U.S.-Israel Ties, the Wall Street Journal shares with the public for the first time the intimate details of Israel’s battle plan against Iran’s nuclear program. In my opinion, the story had a purpose, to stop Israel from attacking Iran in the near-term, but the only thing it may have accomplished is to alter and intensify the way Israel goes about it in the end. The Wall Street Journal story seems it could have been inspired by leaked intelligence, as its Freudian slip in the title wants to tell us. Alterations of the story since its initial publishing also imply mischief. One intimate detail within the report even implied a potential date for the strike, but that portion of the story was curiously altered over the last week or so to blur the view. The recent actions of Israel, the United States, Iran and Russia seem to confirm the possibility of a near-term Israel strike on Iran’s nuclear facilities. Now, maybe nothing will happen later today on November 11, 2015 (11-11-15) as was implied by the WSJ report, but I believe there’s a good enough chance for a near-term event to prepare my followers for what could be a catalytic event for oil (first and foremost), gold, stocks and the dollar.
Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.
The WSJ report details the evolution of the Iran nuclear issue and the efforts of the United States and Israel to stop the troubling ambitions of the Middle Eastern keystone. It begins with a description of cohesive allies working together in all regards to stop their mutual nemesis which possesses clear ill-intent for each. However, the story goes on to show a mutating relationship as power shifts occur in both Israel and especially in the United States. Once President Obama took office, a relationship of trust mutated into one of distrust and dysfunction, full of secrets and spying on one another as much as the mutual foe. The story is a must read, but let me detail for you what I found most telling about it.
Israel and the United States had worked in concert to slow and disrupt Iran’s nuclear efforts. Over time, it became evident to Israel that its actions from distance could only go so far and that a more aggressive engagement would be necessary to deal Iran a hopefully more conclusive blow. However, President Obama came into office after promising the American public that the era of American military engagement in the Middle East would come to an end. His hopeful speech in Cairo was admirable, but only led to an Arab Spring that ushered in chaos and disorder in nations that were at least orderly before. Egypt, Libya, Iraq, Yemen, Afghanistan and Syria fell into chaos and the Islamic State came into being to replace a void left by the American presence now absent. Everything happened just as Mitt Romney and John McCain warned it would, with Obama’s on the job training in foreign policy proving dangerous. The foreign policy damage done by the Obama Administration could take a decade or more to repair if it is reparable at all, and Iran could become a nuclear power in the meantime.
As a result of the President’s plan for peace, and Israel’s disbelief in his logic, the two sides strayed. The President began to covertly work to open channels for discussion with Iran. He reportedly kept Israel in the dark because Israel showed a propensity to leak information it did not agree with, but I believe also to prevent Israel from acting unilaterally against Iran before a deal could be reached. Not much escapes Israel’s highest profile intelligence agency, and the Mossad learned of the secret talks. Distrust was born between two key allies, and the relationship has not been the same since. Benjamin Netanyahu’s National Security Advisor in 2013, Yaakov Amidror, revealed Israel’s awareness to the Obama Administration and said importantly that it was a big mistake to hide the talks with Iran from Israel. I believe the distance that formed between the two nations, and America’s interest in knowing what Israel was up to, may be one of the key reasons the United States spied on its close allies in Europe around the same time. If Israel was no longer working closely with the U.S., perhaps it had formed closer ties with other western powers. The U.S. would want to know what Israel was up to.
The article shows how Israel neared acting unilaterally in 2012, but backed away from military engagement. Israel was able to do so because of the help of the United States to work against Iran via other means. The United States stood strongly against Iran at the time and worked with Israel to unleash a computer virus on Iran’s facilities (Stuxnet) which caused considerable damage and delay. Israel was also active killing key nuclear scientists in Iran and further impeding the process. But Israel realized its efforts were only slowing Iran, and so planned more aggressive action.
I found it revealing that the Wall Street Journal article was altered since it was first published. One of the altered points was that Israel had accomplished a dry run and actually crossed into Iran with aircraft and commandoes in 2012. The article was altered to read that some in the Administration mistakenly believed Israel had done so. Another interesting detail was removed from this report: that Israel was perhaps working with Saudi Arabia because its aircraft could not manage the distance without a rest and refueling along the way. I read that there was the possibility of a temporary airbase being constructed in the desert to allow for that. Saudi Arabia has good reason to assist Israel in its effort to stop Iran, but it also has good reason to keep its assistance secret. And the final point that I noted altered was the portion about Israel’s plans to attack on the darkest of nights. Initially, this read that Israel was targeting exact dates of the new moon in the lunar cycle, or when there is little moonlight. Well, the next new moon is November 11, 2015 (tonight), and Israel has good reason to act sooner rather than later, as the article also reveals. Keep reading…
Importantly, while the US says it will include Israel in information sharing about Iran’s compliance with the nuclear deal, Israel retains its right to act covertly on its own against Iran. Meanwhile, the article suggests that a clause in the nuclear agreement indicates the major powers must help Iran safeguard its facilities against such sabotage. It does not outright indicate that the U.S. should stop Israel from bombing Iran’s facilities, but it is clear that once the deal is in place, Israel will be in a tougher spot. Thus, Israel has to go with its attack before the deal is sealed and the parties involved are complying with their responsibilities. So every new moon should be watched closely now as carrying the potential for war and chaos.
The west’s deal with Iran led by the U.S. looks to me like President Obama’s desperate attempt to stop war from breaking out in the Middle East; and to stop Israel from attacking Iran to start such a war. I wonder if U.S. negotiators even went so far as to tell Iran that they had better work with them or likely face war (we all knew that anyway). If Iran were to garner nuclear weapons and later use them on the United States, I wonder if these efforts for peace won’t be seen as treasonous, if not perfectly ignorant. Netanyahu said that he believed that the parties involved had sincere intentions and the best of them, but that good intentions do not prevent the worst of outcomes. I agree, and highly suggest any doubters read the writings of Iran’s Supreme Leader, through which he guarantees Israel’s nonexistence in a few decades. It’s his goal in fact, the man we just shook hands with.
The Wall Street Journal says its report was based on the accounts of nearly two dozen high ranking representatives of both countries, but I wonder. Has someone in the know revealed these details to the Wall Street Journal at this timely point before the deal is fully enacted in order to make it more difficult for Israel to move unilaterally? Was Israel’s Benjamin Netanyahu invited to the White House this week to ensure Israel does not act during this new moon? Or did Netanyahu come to forewarn the President of an imminent action, or to forewarn other allies of his in the United States. Would Netanyahu even warn the U.S. at this point in time? I perceived high concern on the face of our president and a secret behind the smile of Israel’s leader yesterday in their joint photos. I believe Netanyahu will be back home in time for Israel to still strike tonight (check that), but perhaps Israel would act on November 12 or 13 instead, to allow for the passing of the date that might be in the focus of its enemy now. Or does the alteration of this information within the WSJ piece mean they will go tonight or at the next new moon or near after?
In 2012, when the U.S. was concerned that Israel could act, it sent battle aircraft and a second aircraft carrier to the region, “just in case all hell broke loose.” Last week, the U.S. sent dogfighters, or aircraft that can only fight other aircraft to the region, it implied to protect our bombers from potential engagement by the Russians. That could be true, or they could be there to assist our allies in the event of all hell breaking out… And, maybe the Russians are not there for the reason they state they are either. Recently (last week), the U.S. Air Force took part in an exercise with the IAF; was that to keep an eye on the Israelis or is a joint plan in progress despite all the deal talk?
One thing seems clear to me, Israel believes it has no other choice now but to act unilaterally, though perhaps with assistance from certain allies. If the only thing that stopped Israel in 2012 was its other options thanks to the help of the United States and the economic blocks placed against Iran, then what’s to stop it now? If in the near future the west is obliged to safeguard Iran’s facilities, then why would Israel wait for that complication?
Readers of mine know that from time to time, and all throughout this Iranian nuclear story, I’ve expected conflict. In the early days of my blog I discussed a chance encounter with a French diplomat at a Greek restaurant that threw me for a loop. I could not at the time contemplate how a UN diplomat could believe that Iran wanted nuclear knowledge for any other purpose than to weaponize it. And at certain points in time, I’ve authored similar articles to this one. But, I ask you to review the last speech of Netanyahu at the United Nations, within which he paused for a full minute and stared down the representatives and asked them if they would be so passive if it was their nation under threat by this Iranian regime. I believe Netanyahu has reached the end of his patience and that Israel is about to bomb Iran.
Israel, in the past, asked for bunker buster bombs and Osprey air craft from the U.S. and was denied them. Perhaps Israel has developed or otherwise acquired the weapons it needs over the last three years. Or, perhaps because of the WSJ revelation about Israel’s plans to use commandos to destroy Iran’s facilities from the inside, it is now forced to use nuclear weapons to destroy Iran’s nuclear effort. So you wanted nuclear weapons Iran? Well here they are. Imagine the consequences.
Friends, an attack by Israel on Iran could set forth a series of events in the Middle East, given that far too many players are in the arena today. How far would Israel go and how far would Iran go in its response, assuming it will be capable of one? Will Saudi Arabia be involved? These types of questions and the importance of the region mean that oil prices will skyrocket on the sudden change in paradigm. The dynamics at work in energy prices today are of economic significance solely, and they are forcing oil prices to new lows as I scribble here. I wonder if Saudi Arabia has stubbornly kept to production in order to purposely deflate oil prices ahead of an event that would catapult them. At least, from a lower base point they might be less disruptive and reach a lower high point.
Nonetheless, I expect WTI Crude, today at roughly $43, would immediately surge to $60 and within minutes to $80 or higher. As investors contemplate the new paradigm and the possible repercussions (what Iran might do) over a series of days, oil prices could surge further to $100, $150 or even $200 as events unfold and depending on how they evolve.
Gold is today trading at a spot price of $1084, pressured lower by a strengthening dollar and expectations for Fed tightening. But the Fed will not matter for gold once global chaos is at hand, or regional chaos that could go global. Under similar circumstances and expectations for the Fed, when Russia invaded Ukraine, gold still surged higher despite the dollar factor. It would do the same here. Spot gold prices would surge and not look back until peace was once again at hand. And if any regional conflict at any time threatens the United States in any manner, gold could revisit its highs of the last decade and surpass them.
Indeed, an Israel attack on Iran is a special sort of event with dire consequences and meaningful impact for securities markets. Stocks would crash, just as they did during the Saddam Selloff of the early 90s. But this time, the outcome would be less certain and would take longer to be realized, so stocks could sink further and fail to recover immediately.
This is the sort of “crazy talk” you will never find from a major publisher because of their conservative nature, which results from a fear of risk taking at large organizations. But it’s the type of break-through contrarian work I’ve never strayed from sharing and never will. The only reason I held back this long was for concern of how intelligence agencies might construe my knowledge, which has come purely through discernment (and I may be wrong).
What I am saying here is that a geopolitical risk that has been all but forgotten is as hot as ever and should be given weighting now. As it has not been, investors foreseeing it have an opportunity to capture value. And given the players currently at play in the tight quarters of the Middle East, other error could also drive a similar result even if Israel does not now act on Iran. I feel the risk/reward highly favors buying energy here, and I am long the United States Oil (NYSE: USO); investors could also use the iPath S&P GSCI Crude Oil (NYSE: OIL), the Energy Select Sector SPDR (NYSE: XLE) and the SPDR S&P Oil & Gas E&P (NYSE: XOP) as well as other energy issues to capture this opportunity. Gold investors might use the SPDR Gold Trust (NYSE: GLD) and the Market Vectors Gold Miners (NYSE: GDX), or physical gold if you are very worried. Investors seeking bets against the market or hedges against it could apply the ProShares UltraShort S&P 500 (NYSE: SDS) or simply short the SPDR S&P 500 (NYSE: SPY) via put options. Highly sophisticated investors who understand the security’s risk could use the iPath S&P 500 VIX ST Futures ETN (NYSE: VXX) to hedge their portfolio against risk. I believe the best bets are made on oil on this thesis, and then gold. Follow my blog here, my feed here, my Seeking Alpha column here, my Twitter here, my Facebook here and my email list here.
Kaminis is long United States Oil (NYSE: USO). Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only. Article should interest investors in SPDR Dow Jones
Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ
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A Real Good Reason to Hold Gold - Terrorism in America
After speaking with a globally connected friend of mine this morning, I was reminded of a good reason to hold gold. This friend of mine is an employee of a universally known global non-profit. She said to me that she is going to have to stop reading the daily news compilation that is provided to her each morning, because it is simply too disturbing. She expands, “It’s all about ISIS. ISIS is everywhere.” It’s that last part that troubles me most. Yet, in a recent article, I reasoned why 3 recent terrorism events were non-starters for gold. This article does not contradict that piece, because if ISIS is everywhere, then it should not be long before we start to see its sponsored terrorism here in the United States as well. The 3 terrorism events that happened abroad were not a problem for America and so not a problem for the dollar. When that critical fact changes, and some important representatives of our government are indicating that could be as soon as this weekend, gold prices likely find support. Still, minor and occasional terrorism remain non-threats to our economy and the dollar; rather, it would take a significant event or regular disturbances to stop the current and very powerful trend of dollar strengthening. See more on why to hold gold. Article interests Market Vectors Gold Miners (NYSE: GDX), Goldcorp (NYSE: GG), Newmont Mining (NYSE: NEM), Randgold Resources (Nasdaq: GOLD), Barrick Gold (NYSE: ABX), Direxion Daily Gold Miners Bullish 3X (NYSE: NUGT).
Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.
Why ISIS’s New Currency Will Outlast the U.S. Dollar
The Islamic State of Iraq and the Levant (ISIL), known to us as ISIS, has reportedly developed its own currency. Normally, you would expect the currency of a criminal and murderous state which is opposed by most of the civilized world, to be worthless. However, ISIS’s new currency is at least as viable as the dollar and could even outlast it; that is because it’s made of gold and silver.
Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.
ISIS seems to have developed a viable currency. Syrian activists recently shared these images of the new currency via social media, but ISIS warned the world it was coming in November. It will be known as the “Islamic dinar” to its tragically misguided followers and perhaps morbid coin collectors. To the rest of us, it’ll be known as gold, silver and copper, and it will carry the relative and respected value of those precious metals (melted down of course).
ISIS is reportedly going to have two gold coins, three silver coins and two copper coins. It’s part of the group’s effort to establish and embed itself as a real bona fide nation. The coin is being modeled after an ancient dinar used during the Caliphate of the Uthman in 634 CE. ISIS cannot trade with dollars or euro, obviously, given its opposition to western civilization. It would not want to justify the civil order that its evil guides seek to displace. Who would believe the dollars weren’t counterfeit anyway? Gold is gold and silver is silver, no matter how bloody the money, and even ISIS should be able to trade with it. The coin shown in the image here is reportedly worth $139, determined by its weight in gold not its place of origin or any central bank manipulation.
How can this golden dinar outlast the dollar? Fiat currency like the dollar is basically given its value based on the viability of the country backing it. It’s a market determined relative value versus other currencies. It’s based on many factors including supply and demand, inflation, the credibility of the country issuing it, and the outlook for that nation’s economy and sovereignty; and some would say the manipulative efforts of its central bank.
The dollar is so strong today because the U.S. economy is the world’s most developed and the U.S. government is the world’s most stable. For as long as America goes unchallenged atop the world, the dollar will remain the strongest fiat currency. And since it is a relative value, it benefits today from weakness in other areas of the world.
However, as the world develops, the dollar must give way to it. Stagnant economies like Japan are still losing ground to the dollar, and the euro has its troubles today, but the development of the world has affected the dollar in a profound manner. In my view, it is the fate of the dollar to weaken over time, and the result of global development. As the rest of the world works its way to an even playing field with America, its currencies will gain ground against the dollar as well. Now, this may be decades or a century in coming, as the world’s governments continue to evolve from monarchies, dictatorships and other forms of inefficient managers of economic growth, but it should eventually come, in theory. I say in theory because before it comes, other disruptions are somewhat probable and could undermine fiat currency across the globe. You know what threats I speak of: war (most likely), global warming, asteroids from space, etc.
In such scenarios where the backing of an economy and government isn’t quite as important or even worth anything at all, what will mankind use to trade in goods and services? It will use a barter system, and in the place of goods, gold as a proxy. So, therefore, ISIS’ new currency could outlast even the all-powerful and supreme U.S. dollar. It was a no brainer for the caliphate wanna-be, and gold should be a no brainer for you and me as well for the same reason. Gold is mankind’s default currency, period.
In today’s society, where we expect everything to stay the same and we won’t allow ourselves to foresee risk of change, gold is influenced by many factors. It retains, however, currency value as evidenced by ISIS of all peoples. Gold is therefore a must own in every portfolio for the long-term. And investors today can own derivatives of gold and silver as well, via the shares of gold miners like Randgold Resources (Nasdaq: GOLD), and ETFs like the SPDR Gold Trust (NYSE: GLD), iShares Silver Trust (NYSE: SLV), Market Vectors Gold Miners (NYSE: GDX), and leveraged plays for short short-term bets or hedges like the Direxion Daily Gold Miners Bull 3X Shares (NYSE: NUGT). Nevertheless, there is no perfect replacement for real physical gold for the long-term holder, as evidenced by ISIS’s ability to trade with it. I cover gold and currency regularly and welcome readers to also follow my blog at Wall Street Greek and column at Seeking Alpha.
Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only. Article interests Northrop Grumman (NYSE: NOC), Raytheon (NYSE: RTN), Alliant Techsystems (NYSE: ATK), Lockheed Martin (NYSE: LMT), Boeing (NYSE: BA), NYSE: IWM, NYSE: TWM, NYSE: IWD, Honeywell (NYSE: HON), General Dynamics (NYSE: GD), Rockwell Collins (NYSE: COL), Goodrich (NYSE: GR), L-3 Communications (NYSE: LLL), SAIC (NYSE: SAI), FLIR Systems (Nasdaq: FLIR), EMBRAER (NYSE: ERJ), Spirit Aerosystems (NYSE: SPR), BE Aerospace (Nasdaq: BEAV), TransDigm Group (NYSE: TDG), CAE (NYSE: CAE), Hexcel (NYSE: HXL), Esterline Technologies (NYSE: ESL), Teledyne Technologies (NYSE: TDY), Curtiss-Wright (NYSE: CW), HEICO (NYSE: HEI), Triumph Group (NYSE: TGI), Orbital Sciences (NYSE: ORB), AAR Corp. (NYSE: AIR), Kaman Corp. (Nasdaq: KAMN), AeroVironment (Nasdaq: AVAV), Smith & Wesson (Nasdaq: SWHC), DigitalGlobe (NYSE: DGI), GenCorp (NYSE: GY), Hawk (AMEX: HWK), LMI Aerospace (Nasdaq: LMIA).
ISIS & Terrorism Risk – It's Time to Think About This
Tuesday a White House press conference was stopped while the Secret Service responded to a bomb threat. Earlier in the same day, part of Capitol Hill was evacuated during a Congressional hearing. The events follow other recent scares, but besides the Boston Marathon bombing nothing really catastrophic has happened. However, a very serious threat has been made against America this year by the Islamic State and it warns of attacks over the next six months. Are we overreacting to these called in threats or are investors ignorantly ignoring it all? Given our porous borders and the malintent of America’s organized enemies, maybe we should have some protection in place for portfolios. See the report on ISIS here.Article interests SPDR S&P 500 (NYSE: SPY), iPath S&P 500 VIX (NYSE: VXX), ADT
Corporation (NYSE: ADT), BioCryst Pharmaceuticals (Nasdaq: BCRX), TASER International (Nasdaq: TASR),
American Science & Engineering (Nasdaq: ASEI), Cabela’s (NYSE: CAB),
Matthews International (Nasdaq: MATW). Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.
While a doomsday like stock market crash is unlikely in my opinion, the market is ripe for volatility now. Four main issues trouble me today that I believe are worthy of concern. Ironically, volatility is cheap to buy now, so I suggest investors hedge market volatility risk today via the iPath S&P 500 VIX (NYSE: VXX) and instruments like it. See my full report on the 4 Horsemen of the Stock Market Apocalypse here.
Investment Sector Security
04-08-15 1:40 PM ET
SPDR S&P 500 (NYSE: SPY)
+0.3%
SPDR Dow Jones (NYSE: DIA)
+0.1%
PowerShares QQQ (Nasdaq: QQQ)
+0.6%
iShares Russell 2000 (NYSE: IWM)
+0.7%
Vanguard Total Stock Market (NYSE: VTI)
+0.3%
Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.
Heading into the two-days of closed markets commonly known as the weekend, stocks sold off and gold rose as investors sought to position for it given intensifying geopolitical tension in Yemen. Investors do not want to carry risk into a two-day trading period where special risk exists. But the weekend passed without a bad outcome or surprise in Yemen, so a reversal of last week’s trade followed on Monday. This is the sole reason why gold sold off. But where do we go from here? See my report on gold here.
Precious Metals Relative
Securities
03-30-15
SPDR S&P 500 (NYSE: SPY)
+1.3%
SPDR Gold Trust (NYSE: GLD)
-1.1%
iShares Silver Trust (NYSE: SLV)
-1.7%
Market Vectors Gold Miners (NYSE: GDX)
-1.8%
Market Vectors Junior Gold Miners (NYSE: GDXJ)
-3.5%
Direxion Daily Gold Miners Bull 3X (NYSE: NUGT)
-5.4%
Direxion Daily Gold Miners Bear 3X (NYSE: DUST)
+5.6%
Sprott Physical Gold Trust (NYSE: PHYS)
-1.1%
Goldcorp (NYSE: GG)
-1.0%
Newmont Mining (NYSE: NEM)
-0.9%
Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.
Gold vs. Dollar – Guess Which is Today's Favored Geopolitical Capital Flight Destination
As capital makes its flight to safety over the geopolitical scare in Yemen, it has its usual two favorite destinations to choose from. Capital tends to favor U.S. treasuries over gold at times like these, but given the richness of the dollar, gold may gain greater favor this time around. See my full report on gold vs. the dollar in a capital flight to safety.
Precious Metals & Dollar
Relative Securities
03-26-15
SPDR Gold Trust (NYSE: GLD)
+0.6%
PowerShares DB US Dollar Bull (NYSE: UUP)
+0.4%
iShares Silver Trust (NYSE: SLV)
+0.4%
DISCLOSURE: Kaminis is short UUP. Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.
