“Conviction is worthless unless it is converted into conduct.” (Thomas Carlyle 1795-1881)
Positivity Justified
For a while, sellers have pointed to concerns, but the collective markets’ upward movement persists. Since October 2011, stocks have proved to be relatively attractive, despite muted cheerfulness among experts. Simply, the scoreboard is what keeps all participants honest. Plus, overall volatility remains calmer than in previous months. Secondly, an outlook of crisis, collapse and financial disaster resurfaces from idea generators, but is not fully playing out in practice.
Inaccurate Blames
This junction in the business cycle remains mysterious to some seeing improvement in the economic data and suspenseful to others who witness a rising stock market. The ongoing blame-the-Fed game, reliance on politicians or speculating on election outcomes add further theatrics but fail to paint a full picture. Plenty of myth is identifiable in the crowd engulfed with a "collapse" scenario. Similarly, clinging to feel-good bravado of invincibility is too common and tiresome, even beyond the US political arenas. In fact, this theme of deciphering a balanced view sounds too familiar to traders, much as it does for political observers.
Reading "market moving” materials easily creates a mixed message. The challenge of sorting out the data and messages from overly biased, politically driven sources intensifies in an election year. Surely, there are splits in opinions, which deviate from a required balanced view on topics such as sentiment or nature of the recovery or grasp of Americans’ edge in the global economy. Neutral observers such as money managers are paid to filter headlines while betting on high conviction that goes far beyond toxic banter.
Truth Confronted
At this point, plenty of folks have warned of a lack of overall system stability. Yet, no system is perfect, mindsets are mostly fickle and risk is not easy to assess in any market. Importantly, betting against this market for the last six months has been a losing proposition for managers and analysts. Skeptical managers are forced to readjust their global view from one-sided, fear-driven projections. Unfortunately, admitting fault by most “experts” is unfashionable and works against investors’ interests. For example, much of the worry is around sustainable corporate profits; however, the impact on markets presents a different story. “Mr. Ramsey [Leuthold Group] has studied market performance going back to 1938, and has discovered that in the 16 best years for stocks, eight actually coincided with declines in corporate earnings. And profits rose in 13 of the 16 worst years for stocks.” (New York Times, February 25, 2012).
Near-term awareness:
Pullbacks are not to be feared, as chart observers and odds-makers eagerly anticipate a slowdown. Now, the rising Crude pattern is a convenient catalyst for sellers, but observers have seen this before. Investors are witnessing a collective appreciation in asset classes, in equities as well as commodities. Clearly, there is demand for risky assets and equally, there is a lack of alternatives, given low global yields. In terms of the big picture, the shortage of investable ideas is the reoccurring theme, regardless of pending price declines. The challenge has not changed, as usual. It mostly comes down to picking the right assets while taking the risk of timing it close to “right.”
Article Quotes:
“The improper application of the theory is one of the things that fueled the spectacular growth in over-the-counter derivatives, from $60 trillion in 2000 to more than $600 trillion in 2008. This growth took place while the economists and regulators using bricks and mortar logic were arguing that derivatives distributed risk, when in fact massive amounts of derivatives concentrated risk. The fat tails played a starring role in the bankruptcy of Lehman Brothers and the $182 billion bailout of AIG. Merton's theory was right when certain assumptions held, and wrong when they were applied in an overconnected environment. … Economists, policy makers, and presidential advisors have to get it right. Their influence is so great that when they get it wrong, tragedy often ensues. As Robert Heilbroner explained in his classic book, The Worldly Philosophers, the impact of Adam Smith, Karl Marx, John Maynard Keynes, John Stuart Mill, Thorstein Veblen, and Joseph Schumpeter has been immense” (The Atlantic, February 23, 2012)
“Bond issuance in the U.S. declined in 2011 to $2.13 trillion, down from $2.56 trillion in 2011, according to Dealogic. The volume of syndicated loans rose to $1.87 trillion last year, from $1.13 trillion the year before. The shift has occurred despite the fact that rates on corporate bonds are hovering in the 3.3 percent range, near a record low....The Volcker rule and Basel III will also have unintended consequences. For example, a reduction in the inventory of bonds may spur a shift toward the use of more derivatives. ‘Asset managers already use CDSs to manage credit exposure, and in the future, they may use more CDSs as an alternative to credit,’ McPartland says. While the use of CDSs is not necessarily going to make the markets riskier, the expansion of the CDS market is hardly one of the goals of the Dodd-Frank law. The effect of boosting the CDS market is difficult to predict, especially in the event of a crisis.” (Institutional Investor, February 23, 2012)
Levels:
S&P 500 Index [1365.74] –Quickly approaching May 2011 ranges around 1370. Resumption of the upturn since March 2009.
Crude [$109.77] – A very sharp run in last few weeks. Questionable if the current run can get to $114 before exhausting.
Gold [$1777.50] – Nearing the $1800 mark set up a mixed feeling of strength and doubtful follow-through. For now, trading in a familiar trading range between $1600-1800, as seen in the last seven months.
DXY – US Dollar Index [78.35] – Short-lived dollar rally stalled in January, and that continues to be the near-term trend. Yet, the dollar index is 6% higher than its summer lows.
US 10 Year Treasury Yields [1.97%] – Once again, dropping below “2%,” which serves as an emphasis of low yields.
Dear Readers:
The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed.
Monday, February 27, 2012
Monday, February 20, 2012
Market Outlook | February 20, 2012
“The poetry is all in the anticipation, for there is none in reality” Mark Twain (1835-1910)
Collective rising
Since October 2011, crude and stocks (S&P 500 Index) prices have recovered from the summer losses to revisit levels last reached in May 2011. This is an interesting observation for two main reasons: First, this illustrates the synchronized movement in prices of major asset classes. Secondly, last spring ended up being a precursor to violent summer months. Now, these actions draw similar comparisons and trigger a question: Are investors are too complacent? If so, it is assumed it will justify further price declines. Plenty to be seen before that is answered. In terms of market tops, the current setup does not quite match the 2007 pattern, in which the phrase “synchronized sinking” marked a global peak. Surely, it’s a hard case to claim that markets are geared to mildly crash when overall volume is so low; trust in the system is mostly fragile, while skepticism has yet to evaporate.
For the past few weeks, price corrections have been long awaited in global markets. For example, the Nasdaq 100 index continues its noteworthy move by rising over 27% since August 2011,(led by Apple and IBM). Speculators wonder if this sharp move needs a breather, along with broad markets. Many continue to point out that investor sentiment is picking up, but betting against top performing stocks has mainly backfired against sellers. Clearly, macro catalysts are mostly centered around Europe's ability to fight through issues and China's level of slowdown from persistent growth. However, these fears are not a new discovery but create near-term suspense.
Beyond Business
Much of today’s market action is focused on anticipation of financial reforms, speculating on Federal Reserve actions, and the big reward lies in comprehending the tax and political structure. Asset managers in the post-2008 era face beyond the business-as-usual tasks of identifying growth, conducting value from distressed assets or conducting their own pricing methodology for appropriate pricing. Overhanging legal changes create suspense and reemphasize the value of managing and adjusting to legal risks and costs. “America’s share of initial public offerings fell from 67% in 2002 (when Sarbox passed) to 16% last year, despite some benign tweaks to the law. A study for the Small Business Administration, a government body, found that regulations in general add $10,585 in costs per employee. It’s a wonder the jobless rate isn’t even higher than it is.” (The Economist, February 18, 2012). Again, legal changes in financial services create near-term worries but eventually, this will take its course in a new era.
Resolve
Quite evident without clarity of the new rules of engagement, there is noticeable reluctance by business owners to make aggressive decisions. Similarly, investors have not fully committed to risky assets while awaiting confirmation on strengthening labor data and election results. However, the points above are both well known and confusing for the causal observer in day-to-day headlines. Importantly, there is scarcity in quality ideas, and picking the right one presents upside potential. Perhaps the complacency is more applicable to money managers who struggle to overcome hesitancy and fear. Eventually, risk-aversion is not a growth solution or an ideal form of risk management. Thus, the existing sideline capital will have to take on further risk to get competitive returns.
Article Quotes:
“Why are Chinese households buying a defensive asset [gold] in a time of rapid growth? One reason could be the fear of inflation, which peaked at 7 per cent in mid 2011. But gold-buying by households has increased over the past two years regardless of inflation numbers rising or falling. … A better explanation could be the lack of alternatives for households that are the best savers in the world. In an economy lacking financial sophistication and depth, options are limited to savings accounts, which offer negative real returns, stocks listed on one of the two national exchanges, or else property. … Property is the other alternative. But Chinese knew of the country’s infamous ghost cities long before the international media. Knowing that yield was irrelevant, as many of these properties will never be rented out, locals knowingly bought them as speculative capital assets. Now prices have collapsed in many areas, locals are much more wary of pouring capital into an asset that may never offer a reliable return.” (Financial Times, February 16, 2012).
“Steubenville is one of scores of new boom towns springing up along the American Appalachians, from Ohio and Maryland, to West Virginia, Pennsylvania and New York, all of them beneficiaries of the shale gas revolution, a new technology that allows access to abundant reserves of natural gas trapped within the rock. The results are startling. It’s not just the mini-boom in business investment. It’s also meant that for the first time in more than 40 years, the US is close to achieving its goal of energy self-sufficiency. Energy costs have fallen so sharply that Methanex Corporation, the world’s biggest methanol maker, recently announced it was dismantling its factory in Chile and reassembling it in Louisiana, perhaps the biggest example yet of the new found fashion for “onshoring”. This is just one of any number of similar decisions that stem from the shale gas revolution. Dow Chemical plans a new propylene unit in Texas by 2015. Formosa Plastics similarly proposes a $1.5 billion investment in ethylene-related plants in the same state, while both US Steel and Vallourec are planning multi-million dollar investments in new steel capacity to meet demand for shale gas extraction.” (The Telegraph, February 18 2011)
Levels:
S&P 500 Index [1361.23] – Few points removed from May 2011 intra-day highs of 1370.58. Uptrend is well established.
Crude [$103.24] – Early signs of a breakout after a dull multi-month sideways patter. Breaking above $105 might get buyers enticed to revisit last spring’s highs of around $114.
Gold [$1711.50] –Most near-term trading falling between $1610 and $1750 price range. A break above or below this range can provide a definitive trend picture.
DXY – US Dollar Index [79.33] – Consolidating in the near-term. Trading in line with its 50-day moving average, demonstrating lack of movement.
US 10 Year Treasury Yields [2.00%] – About a year ago, yields stood between 3.40-3.60% range, which showcases a significant decline in rates tied to federal reserve polices.
Dear Readers:
The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed.
Collective rising
Since October 2011, crude and stocks (S&P 500 Index) prices have recovered from the summer losses to revisit levels last reached in May 2011. This is an interesting observation for two main reasons: First, this illustrates the synchronized movement in prices of major asset classes. Secondly, last spring ended up being a precursor to violent summer months. Now, these actions draw similar comparisons and trigger a question: Are investors are too complacent? If so, it is assumed it will justify further price declines. Plenty to be seen before that is answered. In terms of market tops, the current setup does not quite match the 2007 pattern, in which the phrase “synchronized sinking” marked a global peak. Surely, it’s a hard case to claim that markets are geared to mildly crash when overall volume is so low; trust in the system is mostly fragile, while skepticism has yet to evaporate.
For the past few weeks, price corrections have been long awaited in global markets. For example, the Nasdaq 100 index continues its noteworthy move by rising over 27% since August 2011,(led by Apple and IBM). Speculators wonder if this sharp move needs a breather, along with broad markets. Many continue to point out that investor sentiment is picking up, but betting against top performing stocks has mainly backfired against sellers. Clearly, macro catalysts are mostly centered around Europe's ability to fight through issues and China's level of slowdown from persistent growth. However, these fears are not a new discovery but create near-term suspense.
Beyond Business
Much of today’s market action is focused on anticipation of financial reforms, speculating on Federal Reserve actions, and the big reward lies in comprehending the tax and political structure. Asset managers in the post-2008 era face beyond the business-as-usual tasks of identifying growth, conducting value from distressed assets or conducting their own pricing methodology for appropriate pricing. Overhanging legal changes create suspense and reemphasize the value of managing and adjusting to legal risks and costs. “America’s share of initial public offerings fell from 67% in 2002 (when Sarbox passed) to 16% last year, despite some benign tweaks to the law. A study for the Small Business Administration, a government body, found that regulations in general add $10,585 in costs per employee. It’s a wonder the jobless rate isn’t even higher than it is.” (The Economist, February 18, 2012). Again, legal changes in financial services create near-term worries but eventually, this will take its course in a new era.
Resolve
Quite evident without clarity of the new rules of engagement, there is noticeable reluctance by business owners to make aggressive decisions. Similarly, investors have not fully committed to risky assets while awaiting confirmation on strengthening labor data and election results. However, the points above are both well known and confusing for the causal observer in day-to-day headlines. Importantly, there is scarcity in quality ideas, and picking the right one presents upside potential. Perhaps the complacency is more applicable to money managers who struggle to overcome hesitancy and fear. Eventually, risk-aversion is not a growth solution or an ideal form of risk management. Thus, the existing sideline capital will have to take on further risk to get competitive returns.
Article Quotes:
“Why are Chinese households buying a defensive asset [gold] in a time of rapid growth? One reason could be the fear of inflation, which peaked at 7 per cent in mid 2011. But gold-buying by households has increased over the past two years regardless of inflation numbers rising or falling. … A better explanation could be the lack of alternatives for households that are the best savers in the world. In an economy lacking financial sophistication and depth, options are limited to savings accounts, which offer negative real returns, stocks listed on one of the two national exchanges, or else property. … Property is the other alternative. But Chinese knew of the country’s infamous ghost cities long before the international media. Knowing that yield was irrelevant, as many of these properties will never be rented out, locals knowingly bought them as speculative capital assets. Now prices have collapsed in many areas, locals are much more wary of pouring capital into an asset that may never offer a reliable return.” (Financial Times, February 16, 2012).
“Steubenville is one of scores of new boom towns springing up along the American Appalachians, from Ohio and Maryland, to West Virginia, Pennsylvania and New York, all of them beneficiaries of the shale gas revolution, a new technology that allows access to abundant reserves of natural gas trapped within the rock. The results are startling. It’s not just the mini-boom in business investment. It’s also meant that for the first time in more than 40 years, the US is close to achieving its goal of energy self-sufficiency. Energy costs have fallen so sharply that Methanex Corporation, the world’s biggest methanol maker, recently announced it was dismantling its factory in Chile and reassembling it in Louisiana, perhaps the biggest example yet of the new found fashion for “onshoring”. This is just one of any number of similar decisions that stem from the shale gas revolution. Dow Chemical plans a new propylene unit in Texas by 2015. Formosa Plastics similarly proposes a $1.5 billion investment in ethylene-related plants in the same state, while both US Steel and Vallourec are planning multi-million dollar investments in new steel capacity to meet demand for shale gas extraction.” (The Telegraph, February 18 2011)
Levels:
S&P 500 Index [1361.23] – Few points removed from May 2011 intra-day highs of 1370.58. Uptrend is well established.
Crude [$103.24] – Early signs of a breakout after a dull multi-month sideways patter. Breaking above $105 might get buyers enticed to revisit last spring’s highs of around $114.
Gold [$1711.50] –Most near-term trading falling between $1610 and $1750 price range. A break above or below this range can provide a definitive trend picture.
DXY – US Dollar Index [79.33] – Consolidating in the near-term. Trading in line with its 50-day moving average, demonstrating lack of movement.
US 10 Year Treasury Yields [2.00%] – About a year ago, yields stood between 3.40-3.60% range, which showcases a significant decline in rates tied to federal reserve polices.
Dear Readers:
The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed.
Monday, February 13, 2012
Market Outlook | February 13, 2012
“Even cowards can endure hardship; only the brave can endure suspense.” Mignon McLaughlin (1913-1983)
Suspenseful set-up
After a strong run in global stock markets and improvements in US labor results, the credibility of this ongoing recovery faces a suspenseful and eager crowd. The sustainability of a cheerful stock market raises few additional near-term questions. Since October 2011, the uneasy investor feeling showed signs of relative calmness, as showcased by a significant decline in volatility and markup in prices of risky assets. Ironically, it was around early fall 2011, when bad news became exhausted as the gloom and doom estimates appeared too extreme. In fact, claims of European collapse seemed far-fetched and evidence of great depression-like traits were not conclusive.
In other words, the skeptic crowd grew into a larger audience from summer to fall 2011 before losing steam in the past four months. At the same time, the optimistic group is charged up so far in 2012, and will continue to loudly gain further confidence for months ahead. Interestingly enough, both extreme crowds are stubborn in their views but maintain equally high conviction levels. However, the cool-headed outside observer might see a pending period of neutrality. Chart observers are quick to point out that the S&P 500 index is nearing and needing a mild breather at current levels. After all, it’s only natural to have price corrections as it provides a period for all to digest the dislocation between reality and perception. Importantly, assessing risk in sensitive periods is too tricky, and filtering headlines is vital for a better market read. Now, there is a desperate yet nagging desire to decipher the next macroeconomic catalyst.
Reigniting
Much of the last three years has seen a focus on policymakers’ implementation of stimulus-driven resolutions. Now capital allocators are not quite convinced by the proposed government-driven solutions while pondering the prospects of further quantitative easing. Similarly, it’s unclear if the labor number improvements are tangible rather than a clever presentation of economic data. Obviously, the magnitude of economic recovery will determine further talks of Federal Reserve stimulus efforts, while reigniting familiar and passionate debates. The mysterious part of both policymaking and crisis aversion should entice speculators to make bold moves. Basically, the doubt element related to governance risk will persist, especially as financial services reform remains a top priority. Simply put, that’s the new reality that investors will have to accept rather than fight.
Near-term challenges
The multi-month positive performance does not necessarily demonstrate that money managers are buying aggressively or showing signs of complacency. Yet those purchasing shares of US assets since last quarter are looking to hedge or take some profits in days ahead. Investors who strive in periods of high turbulence have been desperately waiting on the sidelines. Thus, volatility traders are too eager to unleash and participate in wild swings. Meanwhile, bargain hunters and value seekers will have to stay focused on selective entry points while not losing perspective of the big picture. Discipline, more often than not, has proved to be more rewarding than chasing short-term trends.
Article Quotes:
“About 11 per cent of the world’s people are over 60 at the moment. In the next 25 years that will double, to almost a fifth, and one in six of those people will be over 80, according to a forthcoming book, Global Aging in the 21st Century, by sociologists Susan McDaniel of the University of Lethbridge and Zachary Zimmer of the University of California. While this is affecting every country and region – even sub-Saharan Africa is now seeing a very fast rise in its proportion of seniors – some countries are being hit very hard. While 12 per cent of Chinese are now over 60, in two decades, there will be more than 28 per cent. Brazil faces a similar blow. It will be very difficult for countries that are only just emerging from poverty to suddenly face huge elder-care costs. Peak people will be an age when jobs compete for workers rather than vice versa. The cheapest labour will vanish. We’re already seeing this: Because China is aging very fast, its dwindling working-age population is turning down the lowest-paid jobs and pushing up the minimum wage sharply, as well as the once-minimal costs of social services: Stuff from China will stop being cheap, because the Chinese aren’t young.” (The Globe & Mail, February 11, 2012)
“And as David Rothkopf points out in his incisive and timely new book, Power Inc, the pendulum has swung sharply from public to corporate in the last generation. That has changed the character of the US economy. ‘In the past there was a tight connection between economic growth leading to jobs creation, which in turn led to broad wealth creation,’ Mr. Rothkopf says. ‘Those links no longer seem to work.’ While profits have been soaring for the past two years, the US economy is now beginning to add enough jobs to reduce the headline rate. But at this speed it will still take until 2020 to restore those lost since 2007 and make up for population growth. For a small share of Americans, strong income growth is back. But for most of those now finding jobs, wages are well below the starting salaries in previous recoveries. ‘Two-tier’ corporations, such as Caterpillar and Chrysler, which hire new people on less than half the wages of older ones and with fewer benefits, are becoming typical.” (Financial Times, February 12, 2012)
Levels:
S&P 500 Index [1342.64] – Stalling around 1350, a level that triggered sell-offs in May and July 2011. Once again, that key level is being tested and setting the psychological barometer.
Crude [$98.67] – Hardly any significant movement the last 50 days. A tight trading range between $96-102.
Gold [$1711.50] –Struggling to move above 1750, last visited in mid-November. Once again, momentum is stalling and ability to stay above $1610 can provide clue on overall buyers’ appetite.
DXY – US Dollar Index [79.11] – Remains in an intermediate-term uptrend as it trades above its 200-day moving average. The dollar is setting up to strengthen in the near-term.
US 10 Year Treasury Yields [1.98%] – For over a month, sitting in a narrow range between 1.80%-2.20%. Until further macro catalysts, this pattern should continue to hold.
Dear Readers:
The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed.
Suspenseful set-up
After a strong run in global stock markets and improvements in US labor results, the credibility of this ongoing recovery faces a suspenseful and eager crowd. The sustainability of a cheerful stock market raises few additional near-term questions. Since October 2011, the uneasy investor feeling showed signs of relative calmness, as showcased by a significant decline in volatility and markup in prices of risky assets. Ironically, it was around early fall 2011, when bad news became exhausted as the gloom and doom estimates appeared too extreme. In fact, claims of European collapse seemed far-fetched and evidence of great depression-like traits were not conclusive.
In other words, the skeptic crowd grew into a larger audience from summer to fall 2011 before losing steam in the past four months. At the same time, the optimistic group is charged up so far in 2012, and will continue to loudly gain further confidence for months ahead. Interestingly enough, both extreme crowds are stubborn in their views but maintain equally high conviction levels. However, the cool-headed outside observer might see a pending period of neutrality. Chart observers are quick to point out that the S&P 500 index is nearing and needing a mild breather at current levels. After all, it’s only natural to have price corrections as it provides a period for all to digest the dislocation between reality and perception. Importantly, assessing risk in sensitive periods is too tricky, and filtering headlines is vital for a better market read. Now, there is a desperate yet nagging desire to decipher the next macroeconomic catalyst.
Reigniting
Much of the last three years has seen a focus on policymakers’ implementation of stimulus-driven resolutions. Now capital allocators are not quite convinced by the proposed government-driven solutions while pondering the prospects of further quantitative easing. Similarly, it’s unclear if the labor number improvements are tangible rather than a clever presentation of economic data. Obviously, the magnitude of economic recovery will determine further talks of Federal Reserve stimulus efforts, while reigniting familiar and passionate debates. The mysterious part of both policymaking and crisis aversion should entice speculators to make bold moves. Basically, the doubt element related to governance risk will persist, especially as financial services reform remains a top priority. Simply put, that’s the new reality that investors will have to accept rather than fight.
Near-term challenges
The multi-month positive performance does not necessarily demonstrate that money managers are buying aggressively or showing signs of complacency. Yet those purchasing shares of US assets since last quarter are looking to hedge or take some profits in days ahead. Investors who strive in periods of high turbulence have been desperately waiting on the sidelines. Thus, volatility traders are too eager to unleash and participate in wild swings. Meanwhile, bargain hunters and value seekers will have to stay focused on selective entry points while not losing perspective of the big picture. Discipline, more often than not, has proved to be more rewarding than chasing short-term trends.
Article Quotes:
“About 11 per cent of the world’s people are over 60 at the moment. In the next 25 years that will double, to almost a fifth, and one in six of those people will be over 80, according to a forthcoming book, Global Aging in the 21st Century, by sociologists Susan McDaniel of the University of Lethbridge and Zachary Zimmer of the University of California. While this is affecting every country and region – even sub-Saharan Africa is now seeing a very fast rise in its proportion of seniors – some countries are being hit very hard. While 12 per cent of Chinese are now over 60, in two decades, there will be more than 28 per cent. Brazil faces a similar blow. It will be very difficult for countries that are only just emerging from poverty to suddenly face huge elder-care costs. Peak people will be an age when jobs compete for workers rather than vice versa. The cheapest labour will vanish. We’re already seeing this: Because China is aging very fast, its dwindling working-age population is turning down the lowest-paid jobs and pushing up the minimum wage sharply, as well as the once-minimal costs of social services: Stuff from China will stop being cheap, because the Chinese aren’t young.” (The Globe & Mail, February 11, 2012)
“And as David Rothkopf points out in his incisive and timely new book, Power Inc, the pendulum has swung sharply from public to corporate in the last generation. That has changed the character of the US economy. ‘In the past there was a tight connection between economic growth leading to jobs creation, which in turn led to broad wealth creation,’ Mr. Rothkopf says. ‘Those links no longer seem to work.’ While profits have been soaring for the past two years, the US economy is now beginning to add enough jobs to reduce the headline rate. But at this speed it will still take until 2020 to restore those lost since 2007 and make up for population growth. For a small share of Americans, strong income growth is back. But for most of those now finding jobs, wages are well below the starting salaries in previous recoveries. ‘Two-tier’ corporations, such as Caterpillar and Chrysler, which hire new people on less than half the wages of older ones and with fewer benefits, are becoming typical.” (Financial Times, February 12, 2012)
Levels:
S&P 500 Index [1342.64] – Stalling around 1350, a level that triggered sell-offs in May and July 2011. Once again, that key level is being tested and setting the psychological barometer.
Crude [$98.67] – Hardly any significant movement the last 50 days. A tight trading range between $96-102.
Gold [$1711.50] –Struggling to move above 1750, last visited in mid-November. Once again, momentum is stalling and ability to stay above $1610 can provide clue on overall buyers’ appetite.
DXY – US Dollar Index [79.11] – Remains in an intermediate-term uptrend as it trades above its 200-day moving average. The dollar is setting up to strengthen in the near-term.
US 10 Year Treasury Yields [1.98%] – For over a month, sitting in a narrow range between 1.80%-2.20%. Until further macro catalysts, this pattern should continue to hold.
Dear Readers:
The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed.
Monday, February 06, 2012
Market Outlook | February 6, 2012
“Logic: The art of thinking and reasoning in strict accordance with the limitations and incapacities of the human misunderstanding.” (Ambrose Bierce 1842 –1913)
An awakening
Recent market moves have awakened investors from the dull and fearful mindsets. A minor rejuvenation in confidence is leading to second thoughts from those who were deeply awaiting a market collapse. Europe remains essential to the global economy, as the anticipated worst case scenarios serve as a negotiation tactic than a proven fact. Similarly, the much talked about “hard-landing” in China feels like a popular and convenient opinion that lingers from the overly fear biased estimates. At the same time, it appears too early to declare a unanimous bull market across key economies.
Not good enough?
The stock market is smoothly pointing to a positive multi-month trend. Headline makers were offered plenty of cheerful and noteworthy statistics this weekend. For example, the Nasdaq closed at an 11 year high and the Dow Jones index reached its best levels since May 2008. In addition, the S&P 500 index has gained over 25% rally since October 4, 2011 lows which reinforces further strength. Interestingly, the S&P downgrade of US debt, in last August is far forgotten while the historic opinion failed to cripple a recovery. Simply, the resilience of the financial system reaffirms the relative edge of America’s economy.
Even a good market performance has its shares of doubters. Improvement in labor numbers has yet to deter naysayers, who are overly focused on the politics of an election year. As expected, those invested in political circles present a conflicted and mostly self-serving view. Obviously, identifying the usual political oriented or social banter is not enough to formulate an investment plan. Now, the stubborn gloom and doom crowd may struggle to deny the increasing drivers of a positive momentum. On the other hand, over- hyping the recent moves has its dangers of overstating the collective confidence. However, most can agree that a follow through, in this recent rally has the cheerful and the gloomy observer equally waiting in a suspenseful manner.
Near-term Digestion
A breather from the upside moves is approaching in days and weeks ahead. Amazingly enough, fear, which was trading at a significant premium is now heavily discounted. Clearly, volatility is remains in a downtrend serving as a barometer of calming nerves. The current market set up may lead to some traders to take some profits or at least hedge their winnings. Nonetheless, the overall bias favors an upside move that has weary sideline observers eagerly watching for next attractive entry points.
Looming in the background, are the day to day results from European resolution efforts. Meanwhile, a better than expected outcome can extended this rally into the late spring months. The surprise element is quite alive as long as majority of money managers continue to view the unresolved Europe ending up in a collapse. In the near-term, a back and forth debate between buyers and sellers can lead to neutral trading patterns. However, the bigger picture favors a recovery and unfairly dismissing that message over the long-term can prove to be costly.
Article Quotes:
“China’s voracious appetite for energy to feed its continued economic development will become increasingly important as the state continues its transition into an industrial powerhouse. In 2009, China just barely overtook the United States as the largest consumer of energy in the world; by 2025, its energy consumption is projected to eclipse the United States by nearly 50 percent. In order to secure access to the energy resources it needs to fuel its economy, Beijing is developing a broad range of energy sources, including investments in solar technology and hydroelectric development. Yet conventional fossil fuels, China is betting, are likely to remain dominant. As a result, Beijing is developing a robust portfolio of fossil fuel resources from a variety of locations, including the Middle East, Central Asia and the South China Sea, in an effort to reduce its vulnerability from any one source. Middle East oil must transit through the Strait of Malacca, which, as Beijing is acutely aware, poses a strategic vulnerability should any state choose to compromise the sea lines of communications by blocking the strait.” (The Diplomat, February 4, 2012)
“The UK is starting to adopt some of the most aggressive US tactics, such as dawn raids on financial institutions and plea bargains, and it recently enacted a ban on bribery that is even tougher than the US foreign corrupt practices act. The eye-watering fines that companies pay in the US may also become a reality in the UK under new proposals from the solicitor general, Edward Garnier. Mr Garnier would like to introduce deferred prosecution agreements (DPAs) akin to those across the Atlantic. The US Department of Justice netted $2.3bn from 32 deferred prosecution agreements in 2010, according to statistics gathered by Gibson Dunn, the law firm. Under a DPA a company can admit wrongdoing, pay a fine and bring in independent monitors. In exchange, prosecutors agree to suspend criminal charges, allowing the company to remain on lucrative government tender lists. In theory, UK regulators and prosecutors could become more powerful than Wall Street expects. In addition to the far-reaching 2010 Bribery Act, the UK laws prohibiting insider dealing are also broader than those in the US, as Mr Einhorn discovered to his peril” (Financial Times, February 5, 2012)
Levels:
S&P 500 Index [1344.90] – Uptrend intact. Breaking out of 1350 and reaching last May highs of 1370 is the next challenge for optimist participants.
Crude [$97.84] – The commodity has yet to establish a well-defined trend above $100. However, any pullback is hardly a dent in the 12 year upside run.
Gold [$1734.00] – Moving at a slower pace in past 5 months. Buyer’s momentum for a re-acceleration is not too convincing. Nonetheless, buyers confirmed interest at $1600.
DXY – US Dollar Index [78.90] – The strong run since September has taken a minor break in the last two weeks. Interestingly, the dollar index is in-line with its 5 day moving average (78.58).
US 10 Year Treasury Yields [1.92%] – No major change in the several weeks. Attempting to stay above its new intra-day lows of 1.79% achieved on January 31, 2012.
http://markettakers.blogspot.com
Dear Readers:
The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed.
An awakening
Recent market moves have awakened investors from the dull and fearful mindsets. A minor rejuvenation in confidence is leading to second thoughts from those who were deeply awaiting a market collapse. Europe remains essential to the global economy, as the anticipated worst case scenarios serve as a negotiation tactic than a proven fact. Similarly, the much talked about “hard-landing” in China feels like a popular and convenient opinion that lingers from the overly fear biased estimates. At the same time, it appears too early to declare a unanimous bull market across key economies.
Not good enough?
The stock market is smoothly pointing to a positive multi-month trend. Headline makers were offered plenty of cheerful and noteworthy statistics this weekend. For example, the Nasdaq closed at an 11 year high and the Dow Jones index reached its best levels since May 2008. In addition, the S&P 500 index has gained over 25% rally since October 4, 2011 lows which reinforces further strength. Interestingly, the S&P downgrade of US debt, in last August is far forgotten while the historic opinion failed to cripple a recovery. Simply, the resilience of the financial system reaffirms the relative edge of America’s economy.
Even a good market performance has its shares of doubters. Improvement in labor numbers has yet to deter naysayers, who are overly focused on the politics of an election year. As expected, those invested in political circles present a conflicted and mostly self-serving view. Obviously, identifying the usual political oriented or social banter is not enough to formulate an investment plan. Now, the stubborn gloom and doom crowd may struggle to deny the increasing drivers of a positive momentum. On the other hand, over- hyping the recent moves has its dangers of overstating the collective confidence. However, most can agree that a follow through, in this recent rally has the cheerful and the gloomy observer equally waiting in a suspenseful manner.
Near-term Digestion
A breather from the upside moves is approaching in days and weeks ahead. Amazingly enough, fear, which was trading at a significant premium is now heavily discounted. Clearly, volatility is remains in a downtrend serving as a barometer of calming nerves. The current market set up may lead to some traders to take some profits or at least hedge their winnings. Nonetheless, the overall bias favors an upside move that has weary sideline observers eagerly watching for next attractive entry points.
Looming in the background, are the day to day results from European resolution efforts. Meanwhile, a better than expected outcome can extended this rally into the late spring months. The surprise element is quite alive as long as majority of money managers continue to view the unresolved Europe ending up in a collapse. In the near-term, a back and forth debate between buyers and sellers can lead to neutral trading patterns. However, the bigger picture favors a recovery and unfairly dismissing that message over the long-term can prove to be costly.
Article Quotes:
“China’s voracious appetite for energy to feed its continued economic development will become increasingly important as the state continues its transition into an industrial powerhouse. In 2009, China just barely overtook the United States as the largest consumer of energy in the world; by 2025, its energy consumption is projected to eclipse the United States by nearly 50 percent. In order to secure access to the energy resources it needs to fuel its economy, Beijing is developing a broad range of energy sources, including investments in solar technology and hydroelectric development. Yet conventional fossil fuels, China is betting, are likely to remain dominant. As a result, Beijing is developing a robust portfolio of fossil fuel resources from a variety of locations, including the Middle East, Central Asia and the South China Sea, in an effort to reduce its vulnerability from any one source. Middle East oil must transit through the Strait of Malacca, which, as Beijing is acutely aware, poses a strategic vulnerability should any state choose to compromise the sea lines of communications by blocking the strait.” (The Diplomat, February 4, 2012)
“The UK is starting to adopt some of the most aggressive US tactics, such as dawn raids on financial institutions and plea bargains, and it recently enacted a ban on bribery that is even tougher than the US foreign corrupt practices act. The eye-watering fines that companies pay in the US may also become a reality in the UK under new proposals from the solicitor general, Edward Garnier. Mr Garnier would like to introduce deferred prosecution agreements (DPAs) akin to those across the Atlantic. The US Department of Justice netted $2.3bn from 32 deferred prosecution agreements in 2010, according to statistics gathered by Gibson Dunn, the law firm. Under a DPA a company can admit wrongdoing, pay a fine and bring in independent monitors. In exchange, prosecutors agree to suspend criminal charges, allowing the company to remain on lucrative government tender lists. In theory, UK regulators and prosecutors could become more powerful than Wall Street expects. In addition to the far-reaching 2010 Bribery Act, the UK laws prohibiting insider dealing are also broader than those in the US, as Mr Einhorn discovered to his peril” (Financial Times, February 5, 2012)
Levels:
S&P 500 Index [1344.90] – Uptrend intact. Breaking out of 1350 and reaching last May highs of 1370 is the next challenge for optimist participants.
Crude [$97.84] – The commodity has yet to establish a well-defined trend above $100. However, any pullback is hardly a dent in the 12 year upside run.
Gold [$1734.00] – Moving at a slower pace in past 5 months. Buyer’s momentum for a re-acceleration is not too convincing. Nonetheless, buyers confirmed interest at $1600.
DXY – US Dollar Index [78.90] – The strong run since September has taken a minor break in the last two weeks. Interestingly, the dollar index is in-line with its 5 day moving average (78.58).
US 10 Year Treasury Yields [1.92%] – No major change in the several weeks. Attempting to stay above its new intra-day lows of 1.79% achieved on January 31, 2012.
http://markettakers.blogspot.com
Dear Readers:
The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed.
Monday, January 30, 2012
Market Outlook | January 30, 2012
“If you do not expect the unexpected, you will not find it; for it is hard to be sought out, and difficult.” - Heraclitus of Ephesus (540 - 480 BC)
Neutral and Eager
The stock market is not trading quite as cheaply as it did last fall. However, it is not hovering at staggering bubble-like ranges either. Meanwhile, a slight suspense is building for the next macro catalysts, as moderate price declines are setting up for the days ahead. Although sentiment remains debatable, there is a growing neutral crowd that’s idle, given the wait and see mode produced by pending elections and European resolutions. Yet, the combination of lower interest rates, lack of liquid alternatives and the eventual shift away from “risk aversion” contributes to favorable long-term upside potential for the US stock market. For trend followers, the 22% increase in the S&P 500 index, from its October 2011 lows, is a sign of early strength. When eliminating the escalating hourly noise, it is hard to dismiss this message highlighting slight improvement from the broad indexes. The upcoming week will test the conviction of buyers while showcasing if there are enough sellers to drum up significant volume.
Labor Mystery
Interestingly, through these unfolding events and upward trending markets, there are plenty of concerns that have not escaped the minds of decision makers and observers. Rosy market performance, of the last few months, reawakens the stringent and very skeptical crowd, which is immersed in worrisome issues. This includes lack of trust in central banks, slowing growth in Asia, lack of sustainable global growth and a combustible social unrest environment. Surely, there is some truth in the concerns but over reliance on reported fears can be overly misleading. Similarly, the true improvement in the US economy remains mixed but certainly tricky since it serves a political issue. The fourth quarter headline growth in GDP of 2.8% does not tell the full story, but is intertwined with mystery. Deciphering the chance of a recession occupies money managers but the answer remains a wildcard. “Presently, we estimate that the effect of these [Seasonal] adjustments range between +2.1 million and -1.1 million jobs in any given month. These are strikingly large numbers compared with the typical range of forecasts that often surround the monthly employment numbers” (John Hussman, January 30, 2012).
Not too Unfathomable
Despite the ongoing tense environment in Europe a looming resolution is awaited, which is both partially misunderstood and mostly fatiguing. A surprise can cause a cheerful response that can drive markets higher than the normal best-case estimates. Of course, a true European resolution to existing wounds is not fully comforting, but after downgrades and further troubling system related discoveries, the downward pressures may subside for a little. Importantly, this crisis is not new at this point and the implication of mismanagement is too great. Politics and posturing aside, several steps for reform are being taken to reach a feasible resolution. Again, markets can translate minor improvements into sensitive upside responses.
Finding analysts with expectations of solid improvement is rare, thus the gutsy contrarians can look into owning banks and risk sensitive themes as a surprise. Once again, the bias against risky assets or increased shifts towards safer assets is quite visible. Gold is the prime symbol of safety, and new waves of buyers seem ready to begin investing in it. At same time, investors seem to require safety while desiring higher returns; a combination that is not practical. Meanwhile, the Federal Reserve’s language advocates betting on risky assets for yet another year. Clearly, for the investor community, to make a collective adjustment from a conventional mindset does and will take some time.
Article Quotes:
“In the meantime, the [European] crisis continues and may superficially appear to be insoluble. Yet, there are in fact several possible solutions to stave off a near-term meltdown when Italy and Spain begin their large bond rollovers in early 2012:
• Germany (and the other economically stronger Eurozone members) can write a cheque and agree to expand the European Financial Stability Facility/European Stability Mechanism and/or give it a banking licence;
• The IMF can write a cheque using new resources from the Eurozone and rest of the world to put together a sizeable new support programme for Italy and/or Spain; or
• The ECB can write a cheque and begin to purchase much larger amounts of the relevant sovereign bonds.
It remains to be seen which solution will be chosen. It is possible, indeed likely, that the ultimate package will combine parts of each of the above.” (VOX, Bergsten and Kirkegaard, January 26, 2012)
“From an innovation perspective, two facts about health care are of importance. First, a huge amount of health care spending is wasted. A strong consensus exists on this point from health care researchers along the political spectrum. Hundreds of billions of dollars are spent on health care today with little or nothing to show for it in terms of improved health. Second, although spending more on health care today doesn't get you much, spending more on health care research gets you a lot. The increases in life expectancy from fewer deaths brought on by cardiovascular disease over the 1970-1990 period, for example, were worth over $30 trillion. Yes, $30 trillion. In other words, the gains from better health over the period 1970-1990 were comparable to all the gains in material wealth over the same period.
Looking at the future, if medical research could reduce cancer mortality by just 10 percent, that would be worth $5 trillion to U.S. citizens (and even more taking into account the rest of the world). The net gain would be especially large if we could reduce cancer mortality with new drugs, which are typically cheap to make once discovered. A reduction in cancer mortality of this size does not seem beyond reach. Medical research spending is far more valuable on the margin than medical care spending yet because we lack an innovation vision, we endlessly debate how to divide the pie while we overlook potentially huge improvements in human welfare.” (The Atlantic, January 26, 2012)
Levels:
S&P 500 Index [1316.33] – Approaching mid-summer ranges between 1300-1350. Setting up for minor declines in the near-term.
Crude [$99.56] – Struggling to climb above the $100 range after several attempts. The 15 week moving average is around $94, showcasing mostly a trendless pattern.
Gold [$1726.00] – The last quarter of 2011 formed a bottoming process around $1600. Momentum favors an upside move that’s building as the next major target stands at $1895.
DXY – US Dollar Index [78.90] – Dollar strength is currently pausing after 2+ month run. It remains in a familiar range, while failing to breakout from its recent strength.
US 10 Year Treasury Yields [1.89%] – Since August 2011, yields have mostly stayed around 2%. Risk aversion is a message that remains in place.
Dear Readers:
The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed.
Neutral and Eager
The stock market is not trading quite as cheaply as it did last fall. However, it is not hovering at staggering bubble-like ranges either. Meanwhile, a slight suspense is building for the next macro catalysts, as moderate price declines are setting up for the days ahead. Although sentiment remains debatable, there is a growing neutral crowd that’s idle, given the wait and see mode produced by pending elections and European resolutions. Yet, the combination of lower interest rates, lack of liquid alternatives and the eventual shift away from “risk aversion” contributes to favorable long-term upside potential for the US stock market. For trend followers, the 22% increase in the S&P 500 index, from its October 2011 lows, is a sign of early strength. When eliminating the escalating hourly noise, it is hard to dismiss this message highlighting slight improvement from the broad indexes. The upcoming week will test the conviction of buyers while showcasing if there are enough sellers to drum up significant volume.
Labor Mystery
Interestingly, through these unfolding events and upward trending markets, there are plenty of concerns that have not escaped the minds of decision makers and observers. Rosy market performance, of the last few months, reawakens the stringent and very skeptical crowd, which is immersed in worrisome issues. This includes lack of trust in central banks, slowing growth in Asia, lack of sustainable global growth and a combustible social unrest environment. Surely, there is some truth in the concerns but over reliance on reported fears can be overly misleading. Similarly, the true improvement in the US economy remains mixed but certainly tricky since it serves a political issue. The fourth quarter headline growth in GDP of 2.8% does not tell the full story, but is intertwined with mystery. Deciphering the chance of a recession occupies money managers but the answer remains a wildcard. “Presently, we estimate that the effect of these [Seasonal] adjustments range between +2.1 million and -1.1 million jobs in any given month. These are strikingly large numbers compared with the typical range of forecasts that often surround the monthly employment numbers” (John Hussman, January 30, 2012).
Not too Unfathomable
Despite the ongoing tense environment in Europe a looming resolution is awaited, which is both partially misunderstood and mostly fatiguing. A surprise can cause a cheerful response that can drive markets higher than the normal best-case estimates. Of course, a true European resolution to existing wounds is not fully comforting, but after downgrades and further troubling system related discoveries, the downward pressures may subside for a little. Importantly, this crisis is not new at this point and the implication of mismanagement is too great. Politics and posturing aside, several steps for reform are being taken to reach a feasible resolution. Again, markets can translate minor improvements into sensitive upside responses.
Finding analysts with expectations of solid improvement is rare, thus the gutsy contrarians can look into owning banks and risk sensitive themes as a surprise. Once again, the bias against risky assets or increased shifts towards safer assets is quite visible. Gold is the prime symbol of safety, and new waves of buyers seem ready to begin investing in it. At same time, investors seem to require safety while desiring higher returns; a combination that is not practical. Meanwhile, the Federal Reserve’s language advocates betting on risky assets for yet another year. Clearly, for the investor community, to make a collective adjustment from a conventional mindset does and will take some time.
Article Quotes:
“In the meantime, the [European] crisis continues and may superficially appear to be insoluble. Yet, there are in fact several possible solutions to stave off a near-term meltdown when Italy and Spain begin their large bond rollovers in early 2012:
• Germany (and the other economically stronger Eurozone members) can write a cheque and agree to expand the European Financial Stability Facility/European Stability Mechanism and/or give it a banking licence;
• The IMF can write a cheque using new resources from the Eurozone and rest of the world to put together a sizeable new support programme for Italy and/or Spain; or
• The ECB can write a cheque and begin to purchase much larger amounts of the relevant sovereign bonds.
It remains to be seen which solution will be chosen. It is possible, indeed likely, that the ultimate package will combine parts of each of the above.” (VOX, Bergsten and Kirkegaard, January 26, 2012)
“From an innovation perspective, two facts about health care are of importance. First, a huge amount of health care spending is wasted. A strong consensus exists on this point from health care researchers along the political spectrum. Hundreds of billions of dollars are spent on health care today with little or nothing to show for it in terms of improved health. Second, although spending more on health care today doesn't get you much, spending more on health care research gets you a lot. The increases in life expectancy from fewer deaths brought on by cardiovascular disease over the 1970-1990 period, for example, were worth over $30 trillion. Yes, $30 trillion. In other words, the gains from better health over the period 1970-1990 were comparable to all the gains in material wealth over the same period.
Looking at the future, if medical research could reduce cancer mortality by just 10 percent, that would be worth $5 trillion to U.S. citizens (and even more taking into account the rest of the world). The net gain would be especially large if we could reduce cancer mortality with new drugs, which are typically cheap to make once discovered. A reduction in cancer mortality of this size does not seem beyond reach. Medical research spending is far more valuable on the margin than medical care spending yet because we lack an innovation vision, we endlessly debate how to divide the pie while we overlook potentially huge improvements in human welfare.” (The Atlantic, January 26, 2012)
Levels:
S&P 500 Index [1316.33] – Approaching mid-summer ranges between 1300-1350. Setting up for minor declines in the near-term.
Crude [$99.56] – Struggling to climb above the $100 range after several attempts. The 15 week moving average is around $94, showcasing mostly a trendless pattern.
Gold [$1726.00] – The last quarter of 2011 formed a bottoming process around $1600. Momentum favors an upside move that’s building as the next major target stands at $1895.
DXY – US Dollar Index [78.90] – Dollar strength is currently pausing after 2+ month run. It remains in a familiar range, while failing to breakout from its recent strength.
US 10 Year Treasury Yields [1.89%] – Since August 2011, yields have mostly stayed around 2%. Risk aversion is a message that remains in place.
Dear Readers:
The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed.
Monday, January 23, 2012
Market Outlook | January 23, 2012
“Doubt is uncomfortable, certainty is ridiculous.” - Voltaire (1694-1778)
The Path Less Paved
Doubtful expectations are being measured against the current realities in the market place. Last week reiterated the realization that lesser bad news can produce surprising upside moves. Recent reactions center around key “fearful” topics: the European breakdown might reach a resolution faster than imagined, China's hard-landing may not occur as outlined in many scripts, and bank earnings received a warmer reception than previously stated in headlines. Not to mention, the ongoing improvement of US economic numbers that paint a hopeful picture, yet demand further follow through.
Since Black Friday, November 25, 2011, the S&P 500 Index has rallied over 13%. This can be seen as a beacon of slight optimism shining out from gloom infested levels. Similarly, successful Italian and Spanish bond auctions are reviving investor confidence, while cooling part of the furious worries. Similarly, debt issuance by US banks witnessed further buying ($28.8 billion last week). Meanwhile, the volatility index has crossed below 20, which on a simple level point to a calmness of nerves. At least the indicator declares all hell is not breaking loose, unlike in July 2011. Regardless of ones preconceived notions or biases, the general market feel displays a resurgence attempt of a global recovery in which the appetite for risky assets is slowly increasing.
Risk Expected - Reward Neglected
These positive trends sparked some relief, but may not be a sign of evading the fragile market conditions. For now, a strong start to the year in broad financial indexes still remains unconvincing for conventional observers and pundits. Perhaps some of the audience is less concerned about market performance at this early stage of 2012. Plus, there is an influential crowd engulfed with politics and elections results; until resolved, stay away from making serious investment bets that count. At the same time, the anticipated fear and rush to “safety” assets continues to linger. For example, “The 21 primary dealers that trade directly with the Federal Reserve held a total of $74.7 billion of Treasuries as of Dec. 28, compared with $61.1 billion of company debt” (Bloomberg, January 17, 2012). This suggests the heavy investor positioning towards risk aversion in anticipation of further volatility. This matches the ongoing weary views of practitioners and strategists. Yet this increases the risk and reward for those betting on upside surprise. In other words, high conviction buyers can look for additional chances to find bargains for longer-term investments.
Near-term Mindset
Chart patterns and odd makers point to the increased potential of a near-term pause. With trading volume down, and believers of a recovery shaky, the pending corrections have many on edge. Yet perhaps it is too premature to conclude on impact of this earnings season, as 119 companies in the S&P 500 Index report earnings this week. The takeaway from the fundamental results can produce substantial clues and serve as a confirmation to vital big picture trends.
Fighting the present trend is disturbing the pessimists, while confusing few rational minds. Age-old theories of “don't fight the Fed,” buy and hold, and blue chips investments are textbook sayings that have lost believers in recent years. Applying these views in recent years has been frustrating, given the turbulent markets; however, today one should not dismiss the value of pure and classical fundamental investment approaches. Perhaps, those classical sayings are suited for a market run in a new cycle while stakeholders flush out irresponsible practices from previous bubbles.
Article Quotes:
“Certainly, in a low-yield environment, the prospect of above-average returns from a nimble and savvy hedge fund manager is particularly alluring. And while pension funds – who make up a growing proportion of the hedge fund investment base – aren’t all that happy with the returns they earned (or failed to earn) from hedgies last year, they don’t see that many alternatives out there.…..That said, small startup funds run by former star traders with great pedigrees might be among the best bets out there. The smaller a fund, the more nimble it can be; it’s hard for a behemoth fund to add value, since the number of stocks in which it can take a large enough stake to make a difference to returns is more limited. Pros who spend their working lives winnowing through the array of hedge funds out there – there are more of them, it seems, than Taco Bell outlets – say that a smaller fund that can venture beyond the world of ultra-liquid, ultra-efficient large cap stocks – where it can prove impossible to find an edge that will pay off – stands a better chance of beating an index.” (The Fiscal Times, January 20, 2012)
“The United States has the largest and most technologically powerful economy in the world, a per capita gross domestic product of $47,200 and a gross national purchasing power that equals those of China and Japan. Our national economy is bigger than those of Russia, Britain, Brazil, France and Italy combined.Our huge GDP is no accident. We have a market-oriented economy where most decisions are made independently by individuals and individual businesses….Meanwhile, in China, government still peers over the shoulder of inventors and ordinary Internet users. India still fights a legacy of corruption in too many places, at too many levels. In Europe, red tape has stifled many small businesses. .During a meeting in Mumbai with three dozen business millionaires in their twenties and thirties, I asked a simple question: Which market would you most like to access? Almost unanimously, the answer was the United States. U.S. companies remain world leaders in information technology, bioscience, nanotechnology and aerospace. The evidence is clear not only in the development of products such as the iPad and iPhone but also in new patents. Last year, U.S. firms captured more than 50 percent of all U.S. patents; they received twice as many corporate patents as Japan, which came in second.” (Washington Post, Former U.S. ambassador to India, January 19, 2012)
Levels:
S&P 500 Index [1315.38] – Climbing back to July 2011 levels in a third wave of a recovery process that began in October 2011. Intermediate-term trends are beginning to turn positive.
Crude [$98.46] – Hovering around $100 as the range bound trading continues, although struggling to climb back up to $114.83 May highs.
Gold [$1653.00] – Partially approaching an oversold entry point for buyers. Yet, the present behavior is not showing the similar buyer appetite as witnessed the last few years.
DXY – US Dollar Index [81.51] – A potential for a minor inflection point approaching in the near-term, however, the dollar’s recovery remains intact.
US 10 Year Treasury Yields [2.02%] – Retesting the 2% level which is close to the 50 day moving average of 1.97%. Barley moving as traders awaited catalysts from macro events or policy changes.
Dear Readers:
The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed.
The Path Less Paved
Doubtful expectations are being measured against the current realities in the market place. Last week reiterated the realization that lesser bad news can produce surprising upside moves. Recent reactions center around key “fearful” topics: the European breakdown might reach a resolution faster than imagined, China's hard-landing may not occur as outlined in many scripts, and bank earnings received a warmer reception than previously stated in headlines. Not to mention, the ongoing improvement of US economic numbers that paint a hopeful picture, yet demand further follow through.
Since Black Friday, November 25, 2011, the S&P 500 Index has rallied over 13%. This can be seen as a beacon of slight optimism shining out from gloom infested levels. Similarly, successful Italian and Spanish bond auctions are reviving investor confidence, while cooling part of the furious worries. Similarly, debt issuance by US banks witnessed further buying ($28.8 billion last week). Meanwhile, the volatility index has crossed below 20, which on a simple level point to a calmness of nerves. At least the indicator declares all hell is not breaking loose, unlike in July 2011. Regardless of ones preconceived notions or biases, the general market feel displays a resurgence attempt of a global recovery in which the appetite for risky assets is slowly increasing.
Risk Expected - Reward Neglected
These positive trends sparked some relief, but may not be a sign of evading the fragile market conditions. For now, a strong start to the year in broad financial indexes still remains unconvincing for conventional observers and pundits. Perhaps some of the audience is less concerned about market performance at this early stage of 2012. Plus, there is an influential crowd engulfed with politics and elections results; until resolved, stay away from making serious investment bets that count. At the same time, the anticipated fear and rush to “safety” assets continues to linger. For example, “The 21 primary dealers that trade directly with the Federal Reserve held a total of $74.7 billion of Treasuries as of Dec. 28, compared with $61.1 billion of company debt” (Bloomberg, January 17, 2012). This suggests the heavy investor positioning towards risk aversion in anticipation of further volatility. This matches the ongoing weary views of practitioners and strategists. Yet this increases the risk and reward for those betting on upside surprise. In other words, high conviction buyers can look for additional chances to find bargains for longer-term investments.
Near-term Mindset
Chart patterns and odd makers point to the increased potential of a near-term pause. With trading volume down, and believers of a recovery shaky, the pending corrections have many on edge. Yet perhaps it is too premature to conclude on impact of this earnings season, as 119 companies in the S&P 500 Index report earnings this week. The takeaway from the fundamental results can produce substantial clues and serve as a confirmation to vital big picture trends.
Fighting the present trend is disturbing the pessimists, while confusing few rational minds. Age-old theories of “don't fight the Fed,” buy and hold, and blue chips investments are textbook sayings that have lost believers in recent years. Applying these views in recent years has been frustrating, given the turbulent markets; however, today one should not dismiss the value of pure and classical fundamental investment approaches. Perhaps, those classical sayings are suited for a market run in a new cycle while stakeholders flush out irresponsible practices from previous bubbles.
Article Quotes:
“Certainly, in a low-yield environment, the prospect of above-average returns from a nimble and savvy hedge fund manager is particularly alluring. And while pension funds – who make up a growing proportion of the hedge fund investment base – aren’t all that happy with the returns they earned (or failed to earn) from hedgies last year, they don’t see that many alternatives out there.…..That said, small startup funds run by former star traders with great pedigrees might be among the best bets out there. The smaller a fund, the more nimble it can be; it’s hard for a behemoth fund to add value, since the number of stocks in which it can take a large enough stake to make a difference to returns is more limited. Pros who spend their working lives winnowing through the array of hedge funds out there – there are more of them, it seems, than Taco Bell outlets – say that a smaller fund that can venture beyond the world of ultra-liquid, ultra-efficient large cap stocks – where it can prove impossible to find an edge that will pay off – stands a better chance of beating an index.” (The Fiscal Times, January 20, 2012)
“The United States has the largest and most technologically powerful economy in the world, a per capita gross domestic product of $47,200 and a gross national purchasing power that equals those of China and Japan. Our national economy is bigger than those of Russia, Britain, Brazil, France and Italy combined.Our huge GDP is no accident. We have a market-oriented economy where most decisions are made independently by individuals and individual businesses….Meanwhile, in China, government still peers over the shoulder of inventors and ordinary Internet users. India still fights a legacy of corruption in too many places, at too many levels. In Europe, red tape has stifled many small businesses. .During a meeting in Mumbai with three dozen business millionaires in their twenties and thirties, I asked a simple question: Which market would you most like to access? Almost unanimously, the answer was the United States. U.S. companies remain world leaders in information technology, bioscience, nanotechnology and aerospace. The evidence is clear not only in the development of products such as the iPad and iPhone but also in new patents. Last year, U.S. firms captured more than 50 percent of all U.S. patents; they received twice as many corporate patents as Japan, which came in second.” (Washington Post, Former U.S. ambassador to India, January 19, 2012)
Levels:
S&P 500 Index [1315.38] – Climbing back to July 2011 levels in a third wave of a recovery process that began in October 2011. Intermediate-term trends are beginning to turn positive.
Crude [$98.46] – Hovering around $100 as the range bound trading continues, although struggling to climb back up to $114.83 May highs.
Gold [$1653.00] – Partially approaching an oversold entry point for buyers. Yet, the present behavior is not showing the similar buyer appetite as witnessed the last few years.
DXY – US Dollar Index [81.51] – A potential for a minor inflection point approaching in the near-term, however, the dollar’s recovery remains intact.
US 10 Year Treasury Yields [2.02%] – Retesting the 2% level which is close to the 50 day moving average of 1.97%. Barley moving as traders awaited catalysts from macro events or policy changes.
Dear Readers:
The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed.
Monday, January 16, 2012
Market Outlook | January 16, 2012
“Clear thinking requires courage rather than intelligence.” - Thomas Szasz (1920-present)
Accepting the Expected
Much of the weekend’s discussion revisits the belabored concerns related to European downgrades. For the most part, there have been no surprises as some wonder if Germany’s outlook upgrade actually stirs up a positive reaction, versus the negative responses to the inevitable downgrade of France and other nations. Of course, further chatter hovers around the magnitude of potential damages to fragile markets. The debate in the Eurozone will live on and the political twist will take its own course. As for participants, there are a few things to digest and balance amidst the flurry of fearful headlines. As witnessed before, downgrades and downturns do grab headlines, but the overall implications can be easily misunderstood.
Short-term traders will focus on bank exposure to toxic debt and clues from earnings reports, while weighing the potential reawakening of extreme volatility levels. These key discussion points can trigger memories back to the summer of 2011, a period of explosive volatility mixed with sensitive responses to unpleasant debt realities. However, this time around, the shock element does not appear on the same frenzied scale, yet we are approaching a period that will strongly test buyers’ conviction.
Meanwhile, the puzzle of slowing growth in Asia will keep money managers in suspense. The rapidly emerging Chinese economy is poised to slow down a little, while the developed Japanese economy has been struggling. Both cases reaffirm the existing relative strength argument of the US market, given lack of alternatives. Yet, the impact of slowing global growth on earnings of multi-national US companies is a major puzzle for those invested in US equities.
Sentiment Clarity
Longer-term investors are trying to grasp the true and confusing sentiment of recent months, while seeking to identify buy points. One side argues sentiment is picking up steam and pointing toward some confidence restoration. When combining the improving labor numbers and stock market rally, there is a case to be made for a minor reawakening of buyers’ faith. Perhaps, much of the attention toward this improvement is attributed to the AAII Investor Sentiment data, which has stayed to be positive (49% bullish and 17.2% bearish). Similarly, the Volatility Index is much lower than previous months as well. This points to the calmness of the US stock market in recent months
On the other hand, European worries are still closer to the higher end of the range when looking at credit spreads, demonstrating extreme fear in investors’ expectations. Similarly, in the US many analysts and hedge fund managers expect a lot of weakness in their targets. Common examples for weak forecasts include those centering around: a slowing global economy, weak earnings, declines in home prices, and hard-landing in China. These are some of the many lists of concerns crafted by strategists and so-called financial experts in opinion pieces.
As a follow up one should ask, if there are more reasons to sell than buy, then why wouldn't everyone bet on a collapse? This is especially a question that should be asked when the reasons to buy appear to be more akin to wishful thinking than a trend. For now, the glaring reasons to purchase assets are either to bet on surprises in improving numbers or to speculate the global angst is overblown. In any case, the roaring guesswork of the quantitative easing 3 announcement is a wildcard that’s gearing up to spark mixed reactions. Not to mention, the election year plays a bigger role in the timing of stimulus announcements. As the perceived risk continues to escalate there is a reward to capture in specific areas for patient participants.
Currency Feel
Last year, a run up in Gold prices confirmed a vote against most currencies and a form of showcasing displeasure in the action of central banks. This year, investors are expressing a similar opinion by betting against the Euro. Interestingly enough, the CFTC showcased total shorts of $25.9 billion for the Euro. Simply, this highlights the migration toward a strengthening US Dollar. This points to risk-aversion that is looming in nearly all financial markets. Perhaps in due time a collective recognition of excessive risk-aversion can retrace financial markets to a normal patterns.
Article Quotes:
“Mistakes directly leading to the deaths of 200 passengers are a very different beast than mistaken economic forecasts, which (as part of a group of culprits including Wall Street greed, regulator incompetence, and home-buyers' ignorance) indirectly led to a great and devastating recession. But like the pilots, the Fed's failure was not a matter of education or training. These were among our greatest economic thinkers. Quite like the pilots, they trusted the mechanics of a complex system they did not fully understand, especially the connection between the housing and financial markets. Amazingly, in retrospect, they often emphasized inflation concerns over housing concerns and the health of Wall Street. (‘Markets are now so much more developed and sophisticated that maybe it's different this time,’ Dino Kos told Greenspan.)…. It was total systemic failure, from 2006 into 2008, to diagnose a crisis and act to stop it, based partly on overconfidence that, in the economy, we had built an unstallable machine -- that the plane could, quite certainly, fly itself.” (The Atlantic, January 13, 2012).
“Fakery is not dead, of course. In 2009, roughly 30% of mobile phones in the country [China] were thought to be shanzhai—a popular term for clever fakes. The Business Software Alliance, a trade group, claims that nearly four-fifths of the software sold in China in 2010 was pirated. In December the US Trade Representative issued its annual report on the world’s most “notorious” counterfeit markets. Of the 30-odd markets identified, eight were in China. Some, such as Beijing’s Silk Street market, are well-known. The report also points the finger at Taobao, an online marketplace owned by Alibaba, China’s biggest e-commerce firm. That may be unfair. Taobao has clamped down so hard recently that it is enduring protests by angry vendors. Still, as China grows richer, life is growing harder for fakers. A recent study of China’s luxury market by Bain, a consultancy, concludes that “demand for counterfeit products is decreasing fast.” McKinsey, another consultancy, found that the proportion of consumers who said they were willing to buy fake jewellery dropped from 31% in 2008 to 12% last year.” (The Economist, January 14, 2012).
Levels:
S&P 500 Index [1277.81] – Slightly above the fragile state of 1280. Overall, short-term momentum is positive, but bound for a further test from buyers.
Crude [$98.70] – Narrow trading arrange forming between $95-100; a range last seen in the summer months, but a near-term deadlock for buyers and sellers.
Gold [$1635.50] – A four-month decline is attempting to settle around the $1600-1650 range. Recovery attempts will be revisited this week.
DXY – US Dollar Index [81.51] – Multi-month appreciation in the dollar confirms the global strength. Positive momentum has built since the frenzy mode in summer 2011.
US 10 Year Treasury Yields [1.86%] – Continues to head lower near all-time lows, with a further reiteration of risk-aversion. September 2011 lows of 1.67% are a key level to watch in weeks ahead.
Dear Readers:
The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed.
Accepting the Expected
Much of the weekend’s discussion revisits the belabored concerns related to European downgrades. For the most part, there have been no surprises as some wonder if Germany’s outlook upgrade actually stirs up a positive reaction, versus the negative responses to the inevitable downgrade of France and other nations. Of course, further chatter hovers around the magnitude of potential damages to fragile markets. The debate in the Eurozone will live on and the political twist will take its own course. As for participants, there are a few things to digest and balance amidst the flurry of fearful headlines. As witnessed before, downgrades and downturns do grab headlines, but the overall implications can be easily misunderstood.
Short-term traders will focus on bank exposure to toxic debt and clues from earnings reports, while weighing the potential reawakening of extreme volatility levels. These key discussion points can trigger memories back to the summer of 2011, a period of explosive volatility mixed with sensitive responses to unpleasant debt realities. However, this time around, the shock element does not appear on the same frenzied scale, yet we are approaching a period that will strongly test buyers’ conviction.
Meanwhile, the puzzle of slowing growth in Asia will keep money managers in suspense. The rapidly emerging Chinese economy is poised to slow down a little, while the developed Japanese economy has been struggling. Both cases reaffirm the existing relative strength argument of the US market, given lack of alternatives. Yet, the impact of slowing global growth on earnings of multi-national US companies is a major puzzle for those invested in US equities.
Sentiment Clarity
Longer-term investors are trying to grasp the true and confusing sentiment of recent months, while seeking to identify buy points. One side argues sentiment is picking up steam and pointing toward some confidence restoration. When combining the improving labor numbers and stock market rally, there is a case to be made for a minor reawakening of buyers’ faith. Perhaps, much of the attention toward this improvement is attributed to the AAII Investor Sentiment data, which has stayed to be positive (49% bullish and 17.2% bearish). Similarly, the Volatility Index is much lower than previous months as well. This points to the calmness of the US stock market in recent months
On the other hand, European worries are still closer to the higher end of the range when looking at credit spreads, demonstrating extreme fear in investors’ expectations. Similarly, in the US many analysts and hedge fund managers expect a lot of weakness in their targets. Common examples for weak forecasts include those centering around: a slowing global economy, weak earnings, declines in home prices, and hard-landing in China. These are some of the many lists of concerns crafted by strategists and so-called financial experts in opinion pieces.
As a follow up one should ask, if there are more reasons to sell than buy, then why wouldn't everyone bet on a collapse? This is especially a question that should be asked when the reasons to buy appear to be more akin to wishful thinking than a trend. For now, the glaring reasons to purchase assets are either to bet on surprises in improving numbers or to speculate the global angst is overblown. In any case, the roaring guesswork of the quantitative easing 3 announcement is a wildcard that’s gearing up to spark mixed reactions. Not to mention, the election year plays a bigger role in the timing of stimulus announcements. As the perceived risk continues to escalate there is a reward to capture in specific areas for patient participants.
Currency Feel
Last year, a run up in Gold prices confirmed a vote against most currencies and a form of showcasing displeasure in the action of central banks. This year, investors are expressing a similar opinion by betting against the Euro. Interestingly enough, the CFTC showcased total shorts of $25.9 billion for the Euro. Simply, this highlights the migration toward a strengthening US Dollar. This points to risk-aversion that is looming in nearly all financial markets. Perhaps in due time a collective recognition of excessive risk-aversion can retrace financial markets to a normal patterns.
Article Quotes:
“Mistakes directly leading to the deaths of 200 passengers are a very different beast than mistaken economic forecasts, which (as part of a group of culprits including Wall Street greed, regulator incompetence, and home-buyers' ignorance) indirectly led to a great and devastating recession. But like the pilots, the Fed's failure was not a matter of education or training. These were among our greatest economic thinkers. Quite like the pilots, they trusted the mechanics of a complex system they did not fully understand, especially the connection between the housing and financial markets. Amazingly, in retrospect, they often emphasized inflation concerns over housing concerns and the health of Wall Street. (‘Markets are now so much more developed and sophisticated that maybe it's different this time,’ Dino Kos told Greenspan.)…. It was total systemic failure, from 2006 into 2008, to diagnose a crisis and act to stop it, based partly on overconfidence that, in the economy, we had built an unstallable machine -- that the plane could, quite certainly, fly itself.” (The Atlantic, January 13, 2012).
“Fakery is not dead, of course. In 2009, roughly 30% of mobile phones in the country [China] were thought to be shanzhai—a popular term for clever fakes. The Business Software Alliance, a trade group, claims that nearly four-fifths of the software sold in China in 2010 was pirated. In December the US Trade Representative issued its annual report on the world’s most “notorious” counterfeit markets. Of the 30-odd markets identified, eight were in China. Some, such as Beijing’s Silk Street market, are well-known. The report also points the finger at Taobao, an online marketplace owned by Alibaba, China’s biggest e-commerce firm. That may be unfair. Taobao has clamped down so hard recently that it is enduring protests by angry vendors. Still, as China grows richer, life is growing harder for fakers. A recent study of China’s luxury market by Bain, a consultancy, concludes that “demand for counterfeit products is decreasing fast.” McKinsey, another consultancy, found that the proportion of consumers who said they were willing to buy fake jewellery dropped from 31% in 2008 to 12% last year.” (The Economist, January 14, 2012).
Levels:
S&P 500 Index [1277.81] – Slightly above the fragile state of 1280. Overall, short-term momentum is positive, but bound for a further test from buyers.
Crude [$98.70] – Narrow trading arrange forming between $95-100; a range last seen in the summer months, but a near-term deadlock for buyers and sellers.
Gold [$1635.50] – A four-month decline is attempting to settle around the $1600-1650 range. Recovery attempts will be revisited this week.
DXY – US Dollar Index [81.51] – Multi-month appreciation in the dollar confirms the global strength. Positive momentum has built since the frenzy mode in summer 2011.
US 10 Year Treasury Yields [1.86%] – Continues to head lower near all-time lows, with a further reiteration of risk-aversion. September 2011 lows of 1.67% are a key level to watch in weeks ahead.
Dear Readers:
The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed.
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