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  Jim Kingsland

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  General News, Jim Kingsland Blog

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  2/20/12
  Yes, it must be time to celebrate a near 2% rise to around $105 per barrel for West Texas intermediate crude. That’s what one might conclude is happening by simply looking at a trading screen without knowing exactly what the headlines are. Crude is up, up, up and stock futures are also firm (though the cash markets are closed for Washington’s birthday-observed).

  Crude is touching $105 in reaction to Iran’s freezing of shipments of crude to England and France. Stock futures players are said to focused on China’s decision to lower Reserve Ratio Requirements – a step akin to providing more liquidity to its economy. Gold is tacking on some gains to boot. The yellow metal is up about $10 into the $1735 area. Gold is rising on the notion that whatever happens with Greece, the ECB will be doing some sort of massive printing sooner rather than later to keep the banking cartel whole.

  $105 crude should be a bit troubling, but thus far the stock world is ignoring the weekend ratchet up in price. We know the Saudi’s have vowed to not let crude average more than $100 per barrel for any length of time by providing more crude to the markets. Good luck with that. From a technical perspective, crude has entered a void where there is not much resistance between here and the $130 area. Rather than an 86% rise in the price of gasoline since Obama took office, world circumstances will make it a 100% gain in gasoline over the past four years at the rate the market is moving at the present time. But on the face of it, that would seal Obama’s fate as a one termer – no doubt some sort of solution to the high price of gasoline will need to be concocted before election day. Maybe they will, in their infinite wisdom, tap emergency supplies store in the Strategic Petroleum Reserve. In the interim, regular visits to the pump could become very unpleasant. Demand destruction could turn out to be a gasoline consumer’s best friend.

   
  On a more technical front, the 3-2-1 NYMEX crack spread at above $25 remains favorable for refiners. For them, it’s like minting money.

  This map shows California, New York, Connecticut and Northern Maine already on the cusp of averaging $4 per gallon of gasoline.

  

  Gasoline will need to steadily decline once we are past Memorial Day to the point of where it is now by the time Labor Day arrives. If crude pushes to $130 and the price at the pump rises to $5 or more, this will prove quite problematic for the current occupant of 1600 PA Avenue in DC.
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  The argument for gold remains intact . The world headlines of on going strife should be enough to spur a larger number of investors into gold.
  Then there’s the on going mainstream thinking. Just 2 out 51 financial advisors in a Barron’s poll are advising their clients to allocate some of their holdings to gold. The majority of the mainstreamers still are biased to blue chip stocks. Gold has risen 7-fold in a decade; you’d think these characters would see the light, but they operate as if their eyes are closed. For now, this group of “experts” remains a CONTRARY indicator. It’s also an indication that gold is not even close to being a bubble. When these investment gurus turn bullish on gold is the day I will become gold BEAR.

  It’s not that I have anything against Blue Chips. There are some great ones: IBM, many of the railroads, Microsoft, Apple, McDonald’s, UTX, etc., but let’s be realistic – physical gold and even some silver should be part of a portfolio. Ignoring gold, won’t make gold go away. Ignoring gold is not going to make gold’s outperformance relative to stocks go away. The investment pros who ignore gold are doing a great disservice to their clients.

  Have a super day celebrating Washington’s burthday!

  That’s right. On the NYSE it is WASHINGTON’s birthday and not presidents’ day:

  Washington’s Birthday was first declared a federal holiday by an 1879
  act of Congress. The Monday Holiday Law, enacted in 1968, shifted the
  date of the commemoration of Washington’s Birthday from February 22 to
  the third Monday in February, but neither that law nor any subsequent
  law changed the name of the holiday from Washington’s Birthday to
  President’s Day. Although the third Monday in February has become
  popularly known as President’s Day, the NYSE’s designation of
  Washington’s Birthday as an Exchange holiday (Rule 51) follows the form
  of the federal holiday outlined above (section 6103(a) of title 5 of the
  United States Code).

  I can’t wait to do my yearly trip to Mount Vernon this Spring. It’s a pity that George and Martha had no children and thus no direct descendents of their own.

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