30 Nisan 2012 Pazartesi
Why Businesses Aren't Investing in the U.S.
Businesses aren’t investing in the United States because of a lack of consumer demand, International Paper CEO John Faraci said Friday.
“I think this was all about consumer spending and demand. You know, the problem we have is there’s inadequate demand to create jobs. We know how to respond when there is demand,” he said on CNBC’s “The Kudlow Report.”
The U.S. Commerce Department estimated that gross domestic product expanded at a 2.2 percent annual rate in the first quarter, falling short of analysts’ expectations it would grow 2.5 percent and slowing down from the fourth quarter’s 3-percent rate.
Consumer spending has been damped partly because the nationwide housing market has yet to recover, he said.
“Until it does, we’re not going to see the kind of consumer spending you would expect coming out of a recovery,” he said.
Asked again by host Larry Kudlow why companies were not investing, Faraci once more pointed to demand that has not materialized.
“Productivity has obviously been very good, so we’re creating more capacity with less resources. But at the end of the day, this is really about responding to demand, whether it’s automobiles or packaging products we make for a whole variety of industries and end users,” he said.
“We’re investing in India. We’re investing in Russia. We’re investing in Brazil. Not to ship products back here but because demand exists in those markets,” he said. “At the end of the day, this is really about responding to demand. We’re not going to go out and invest unless there’s demand.”
Earlier in the day, International Paper posted a better-than-expected quarterly profit on strong sales of shipping boxes and paper.
“I feel very good about the rest of the year,"Faraci told Reuters. "It’s not a macro-bullish story. It’s a macro-positive story.”
Don Peebles, CEO of Peebles Corp., a real estate developer, said that housing remains a drag on the economy.
A strong market, cheap money and high leverage fueled growth before the financial crisis, he said.
“What’s happening now is the housing market is not able to carry the economy,” he said. “Americans’ wealth has been decimated as a result of the lost value in their homes.”
Peebles also acknowledged, as the only small-business owner, that rising health-care costs and uncertainty over taxes were a challenge. But, he added, the No. 1 issue was access to capital.
Mort Zuckerman, founder of real estate investment trust Boston Properties and publisher of the New York Daily News and U.S. News & World Report, took aim at the slow growth.
Zuckerman blamed the housing-market collapse, as well as health-care costs and what he called an “inadequate, badly structured stimulus program.”
“Clearly, you should’ve had a GDP growth now of somewhere between 6 and 8 percent, with the degree of monetary and fiscal stimulus,” he said.
Monday Morning Musings
The market is lower in early trade after a 4-day bounce last week that resulted in solid weekly gains for the major indexes.
The big news has come on the M&A front this morning. First, Microsoft (MSFT) said it will invested $300 million into Barnes & Noble (BKS) to form a strategic partnership aimed at accelerating the transition to e-reading. BKS stock is up a whopping 62% on the news, aided by short-covering.
Also, Gen-Probe (GPRO) reported solid earnings but also said it will be acquired by HOLX for $82.75, which is roughly a 20% premium to Friday's closing price.
In economic news, the Chicago PMI was disappointing at 56.2 vs. a reading of 60 that was expected. Personal spending for March was also below expectations at +0.3% vs. +0.5% consensus. Friday will bring the monthly jobs report, and I just saw that Goldman is estimating the economy added 125k jobs in April.
Asian markets were mostly higher overnight, while Europe is lower this morning on confirmation that Spain is officially in recession. But is that really a surprise?
Earnings reactions have been mostly to the downside from what I've noticed today. Examples of stocks falling on earnings reports this morning include: ABV, HUM, SOHU, and NYX to name a few.
The dollar is roughly flat vs. the euro, but commodities are mostly lower today. Oil prices are lower near $104.40 and gold prices have eased back to $1657.
The 10-year yield is drifting lower to 1.91%; and the VIX is +6% higher so far near the 17.35 level.
Trading comment: I read an interesting article asking whether traders were preparing for the same summer selloff pattern that the markets experienced in 2010 and 2011. While the fundamental backdrop seems similar (slowing economic data, unsettling news out of Europe) we don't have the same shocks like the flash crash or the earthquake. Also, bond yields are already lower at current levels than they were before both summer rallies the last couple of years. Additionally, corporate profit growth has been strong so valuations are cheaper than they have been as well. There were the arguments that were made for any pullback to be more mild in nature. But I would argue that we simply don't know, and that once a selloff picks up steam, its usually investor fear that drives prices lower than most investors were looking for. So we are trimming some equity exposure ahead of time just to try to position ourselves better ahead of summer.
The big news has come on the M&A front this morning. First, Microsoft (MSFT) said it will invested $300 million into Barnes & Noble (BKS) to form a strategic partnership aimed at accelerating the transition to e-reading. BKS stock is up a whopping 62% on the news, aided by short-covering.
Also, Gen-Probe (GPRO) reported solid earnings but also said it will be acquired by HOLX for $82.75, which is roughly a 20% premium to Friday's closing price.
In economic news, the Chicago PMI was disappointing at 56.2 vs. a reading of 60 that was expected. Personal spending for March was also below expectations at +0.3% vs. +0.5% consensus. Friday will bring the monthly jobs report, and I just saw that Goldman is estimating the economy added 125k jobs in April.
Asian markets were mostly higher overnight, while Europe is lower this morning on confirmation that Spain is officially in recession. But is that really a surprise?
Earnings reactions have been mostly to the downside from what I've noticed today. Examples of stocks falling on earnings reports this morning include: ABV, HUM, SOHU, and NYX to name a few.
The dollar is roughly flat vs. the euro, but commodities are mostly lower today. Oil prices are lower near $104.40 and gold prices have eased back to $1657.
The 10-year yield is drifting lower to 1.91%; and the VIX is +6% higher so far near the 17.35 level.
Trading comment: I read an interesting article asking whether traders were preparing for the same summer selloff pattern that the markets experienced in 2010 and 2011. While the fundamental backdrop seems similar (slowing economic data, unsettling news out of Europe) we don't have the same shocks like the flash crash or the earthquake. Also, bond yields are already lower at current levels than they were before both summer rallies the last couple of years. Additionally, corporate profit growth has been strong so valuations are cheaper than they have been as well. There were the arguments that were made for any pullback to be more mild in nature. But I would argue that we simply don't know, and that once a selloff picks up steam, its usually investor fear that drives prices lower than most investors were looking for. So we are trimming some equity exposure ahead of time just to try to position ourselves better ahead of summer.
27 Nisan 2012 Cuma
Is The Market Whistling Past A Greek Redux?
The markets are slightly higher in early trading on the heels of more than 100 earnings reports that have come out last night and this morning, some mixed economic data, and another downgrade of Spain.
So far there doesn't seem to be much reaction to the S&P downgrade of Spanish debt to BBB+ from A, and a negative outlook. Is the market whistling past a Greek redux?
In economic news, advance Q1 GDP estimates for the U.S. show the economy grew +2.2%. This is below the 2.5% that had been expected, but in light of the slowdown in many other countries looks pretty good by comparison.
Also, the final reading on Univ. of Mich. consumer sentiment for April improved to 76.4 from the prior reading of 75.7. So the mood among consumers remains upbeat, and that hopefully bodes well for the economy near-term, considering nearly 70% of our GDP is driven by consumer spending.
Asian markets were mostly lower overnight. The dollar is a bit lower today, giving a small boost to the CRB Commodity Index. Oil prices are down slightly around $104.40. And gold prices are higher near $1665.
There were tons of earnings reports in the last 24 hrs, but here are a few notable movers:
Stocks rising on earnings:
Trading comment: There have been more stocks falling on earnings reports than rising today, at least from what I have seen. The indexes are still comfortably above their 50-day support, so investors are in buying mode. But many leading growth stocks have more work to do in terms of consolidating their recent gains and building new bases from which they launch new rallies. I would be somewhat surprised if the market went right back to new highs at this juncture. Something tells me we are more likely to be in a trading range in the near-term.
KAM Advisors has long positions in SPG, SBUX, PG
So far there doesn't seem to be much reaction to the S&P downgrade of Spanish debt to BBB+ from A, and a negative outlook. Is the market whistling past a Greek redux?
In economic news, advance Q1 GDP estimates for the U.S. show the economy grew +2.2%. This is below the 2.5% that had been expected, but in light of the slowdown in many other countries looks pretty good by comparison.
Also, the final reading on Univ. of Mich. consumer sentiment for April improved to 76.4 from the prior reading of 75.7. So the mood among consumers remains upbeat, and that hopefully bodes well for the economy near-term, considering nearly 70% of our GDP is driven by consumer spending.
Asian markets were mostly lower overnight. The dollar is a bit lower today, giving a small boost to the CRB Commodity Index. Oil prices are down slightly around $104.40. And gold prices are higher near $1665.
There were tons of earnings reports in the last 24 hrs, but here are a few notable movers:
Stocks rising on earnings:
- AMZN, SPG, NWL, AEM
- DECK, WDC, SBUX, PG, HMSY, KLAC, MDRX
Trading comment: There have been more stocks falling on earnings reports than rising today, at least from what I have seen. The indexes are still comfortably above their 50-day support, so investors are in buying mode. But many leading growth stocks have more work to do in terms of consolidating their recent gains and building new bases from which they launch new rallies. I would be somewhat surprised if the market went right back to new highs at this juncture. Something tells me we are more likely to be in a trading range in the near-term.
KAM Advisors has long positions in SPG, SBUX, PG
26 Nisan 2012 Perşembe
Fewer Upside Surprises In Today's Earnings Reports
The market is flattish in early trading as scores of earnings reports continue to flood in. Looking over today's report, there seems to be fewer upside surprises and more stocks that are trading down on in-line earnings reports. Here's a few examples:
Stocks rising on earnings:
Asian markets were mixed overnight, while Europe is mostly lower this morning. The dollar is lower vs. the euro and that is helping boost commodities. Oil prices are higher to $104.70 and gold prices have finally made a push above $1650 (currently $1657).
The 10-year yield again got rebuffed at the 2.0% level and is lower to 1.95%. And the VIX is fractionally higher to 16.95 after moving back below its 50-day yesterday.
Trading comment: The major indexes are holding above their respective 50-day support lines. This has the potential to put the bulls back in the driver's seat. Yesterday's rally came on rising volume, so that's a start. For those who follow the IBD-style market trend, we need to see a follow-thru rally on rising volume over the next week or so to confirm yesterday's rally attempt. We also need to see many of these growth stocks that have been rolling over start to find support and attempt to build new bases. Today SCSS is rolling over below its 50-day.
KAM Advisors has long positions in NUAN, SCSS, STMP, VAR, XOM
Stocks rising on earnings:
- NUAN, SWI, EQIX, STMP, VIVO, REGN, MWW
- VAR, AKAM, LVS, DOW, DB, UPS, XOM, LSTR, NUS
Asian markets were mixed overnight, while Europe is mostly lower this morning. The dollar is lower vs. the euro and that is helping boost commodities. Oil prices are higher to $104.70 and gold prices have finally made a push above $1650 (currently $1657).
The 10-year yield again got rebuffed at the 2.0% level and is lower to 1.95%. And the VIX is fractionally higher to 16.95 after moving back below its 50-day yesterday.
Trading comment: The major indexes are holding above their respective 50-day support lines. This has the potential to put the bulls back in the driver's seat. Yesterday's rally came on rising volume, so that's a start. For those who follow the IBD-style market trend, we need to see a follow-thru rally on rising volume over the next week or so to confirm yesterday's rally attempt. We also need to see many of these growth stocks that have been rolling over start to find support and attempt to build new bases. Today SCSS is rolling over below its 50-day.
KAM Advisors has long positions in NUAN, SCSS, STMP, VAR, XOM
25 Nisan 2012 Çarşamba
Earnings Trump Economic Data In Early Trade
The markets are nicely higher in early trading on the heels of some better than exepcted earnings reports. There was a disappointing economic report this morning in the form of durable goods, which fell -4.2% in March. But investors are giving the data a pass and focusing on earnings.
The big earnings report last night was of course Apple (AAPL). In case you missed it, AAPL blew out the numbers by more than $2. It also sold 5 million more iPhones than the analysts were forecasting, and gross margins also posted significant upside.
I had been saying coming into the report that the recent action in AAPL seemed to me to be reflecting dramatically lowered expectations for the earnings report. So I felt the stock was poised to bounce on the report, even if they only posted a mild beat. But the stock has ramped on the earnings announcement, up by more than $50 (or 10%) back above the $610 level.
Stocks rising on earnings reports:
The 10-year yield is getting another small bounce, but is still bumping its head at the 2.00% level, which has been resistance all year, despite a few brief spikes above those levels.
And the VIX is down 4% to 17.36.
Trading comment: The market is up a lot in early trading, but it remains to be seen if the strength can last into the close. We also have the FOMC announcement today, and I think many are looking for the Fed to provide some hints about QE3. I don't think the Fed is going to go there right now. My guess is that they remain on point with what they have been saying recently. I think they will reiterate holding rates low into 2014, and again say that they see inflationary pressures as temporary.
KAM Advisors has long positions in AAPL
The big earnings report last night was of course Apple (AAPL). In case you missed it, AAPL blew out the numbers by more than $2. It also sold 5 million more iPhones than the analysts were forecasting, and gross margins also posted significant upside.
I had been saying coming into the report that the recent action in AAPL seemed to me to be reflecting dramatically lowered expectations for the earnings report. So I felt the stock was poised to bounce on the report, even if they only posted a mild beat. But the stock has ramped on the earnings announcement, up by more than $50 (or 10%) back above the $610 level.
Stocks rising on earnings reports:
- S, MOS, BA, HOG, GNC, PNRA, FTNT, AMGN, NSC
- ABB, CAT, GD, BIDU
The 10-year yield is getting another small bounce, but is still bumping its head at the 2.00% level, which has been resistance all year, despite a few brief spikes above those levels.
And the VIX is down 4% to 17.36.
Trading comment: The market is up a lot in early trading, but it remains to be seen if the strength can last into the close. We also have the FOMC announcement today, and I think many are looking for the Fed to provide some hints about QE3. I don't think the Fed is going to go there right now. My guess is that they remain on point with what they have been saying recently. I think they will reiterate holding rates low into 2014, and again say that they see inflationary pressures as temporary.
KAM Advisors has long positions in AAPL
24 Nisan 2012 Salı
B-WAVE BOTTOM
Over the last several days volatility in the gold market has collapsed forming what is known as a coil.
I think the Fed announcement tomorrow will probably break gold out of this holding pattern. But contrary to popular belief about 70% of the time the initial move out of a coil ends up being a false move that is reversed by a more powerful and durable move in the opposite direction.
In this case if gold breaks lower out of the coil it is late enough in the intermediate cycle that the move would be unlikely to last more than a few days before forming what would presumably be an intermediate cycle and B-Wave bottom.
I suspect many gold bugs are going to get knocked out of their position if this scenario plays out tomorrow. However if this does turn out to be a B-Wave bottom like I think it will, the next couple of days are going to be the single best buying opportunity for the rest of this secular bull market.
That doesn't mean that gold will reverse and head straight up immediately. I expect we will probably see a volatile consolidation with several tests of the all-time highs above $1900 but no breakout for the rest of the summer.
Traders are going to be looking for the next trend once the stock market bottoms. I doubt that tech stocks are going to resume the leading role that they've enjoyed since last October. More likely liquidity will find its way into a beaten up sector.
Like I always say, liquidity will eventually flow into undervalued assets. There is no sector as undervalued and as unloved as the mining stocks right now.
Sentiment in this sector has reached levels of pessimism capable of generating triple digit returns over the next couple of years, and I wouldn't even be surprised to see a 25 - 50% gain during the next intermediate cycle alone.
I think the next momentum move is about to begin in the sector most overlooked and least expected by investors, the mining stocks.
I think the Fed announcement tomorrow will probably break gold out of this holding pattern. But contrary to popular belief about 70% of the time the initial move out of a coil ends up being a false move that is reversed by a more powerful and durable move in the opposite direction.
In this case if gold breaks lower out of the coil it is late enough in the intermediate cycle that the move would be unlikely to last more than a few days before forming what would presumably be an intermediate cycle and B-Wave bottom.
I suspect many gold bugs are going to get knocked out of their position if this scenario plays out tomorrow. However if this does turn out to be a B-Wave bottom like I think it will, the next couple of days are going to be the single best buying opportunity for the rest of this secular bull market.
That doesn't mean that gold will reverse and head straight up immediately. I expect we will probably see a volatile consolidation with several tests of the all-time highs above $1900 but no breakout for the rest of the summer.
Traders are going to be looking for the next trend once the stock market bottoms. I doubt that tech stocks are going to resume the leading role that they've enjoyed since last October. More likely liquidity will find its way into a beaten up sector.
Like I always say, liquidity will eventually flow into undervalued assets. There is no sector as undervalued and as unloved as the mining stocks right now.
Sentiment in this sector has reached levels of pessimism capable of generating triple digit returns over the next couple of years, and I wouldn't even be surprised to see a 25 - 50% gain during the next intermediate cycle alone.
I think the next momentum move is about to begin in the sector most overlooked and least expected by investors, the mining stocks.
Stocks Attempt To Bounce In Early Trade
I think after yesterday's selloff I would prefer to see stocks open weak this morning and then rally into the close. Stocks have opened strong, and if they can't maintain these early gains into the close it will not inspire much confidence.
Speaking of confidence, the April Consumer Confidence index eased to 69.2 from 70.2 the prior month, but the index is still at a fairly high level.
Housing data was mixed. New home sales improved in March, but the Case-Shiller index fell -3.5% in February after falling -3.8% the prior month.
There has been a flurry of earnings reports out last night and this morning. Reactions have been mixed. I don't see any huge gainers on earnings, and the one big disappointment I see is Netflix (NFLX).
Stocks rising on earnings reports:
The dollar is lower vs. the euro today, and that is helping the CRB commodity index gain 0.4%. Oil prices are higher to $103.75 while gold prices have risen to $1646. Gold hasnt' been able to get above that $1650 level in awhile.
The 10-year yield is getting a small bounce to 1.96%. And the VIX is down 2% to 18.56 after spiking to the 20 level yesterday before reversing lower.
Trading comment: All eyes will be on Apple (AAPL) tonight. The stock is down again today on weak activation numbers out of T-mobile. I feel like the big pullback from recent highs has lowered expectations sufficiently going into the earnings report that AAPL should trade okay following the report. If the stock had continued to run ahead of the earnings report, I would be much more worried about a plunge on any disappointing numbers. But at current levels I feel there is at least a little bit of a margin on safety in the stock given that it remains very cheap on a P/E and PEG basis.
KAM Advisors has long positions in AAPL, MMM, and UTX; short NFLX
Speaking of confidence, the April Consumer Confidence index eased to 69.2 from 70.2 the prior month, but the index is still at a fairly high level.
Housing data was mixed. New home sales improved in March, but the Case-Shiller index fell -3.5% in February after falling -3.8% the prior month.
There has been a flurry of earnings reports out last night and this morning. Reactions have been mixed. I don't see any huge gainers on earnings, and the one big disappointment I see is Netflix (NFLX).
Stocks rising on earnings reports:
- MMM, T, UTX, KSU, ITW, TROW, PH, BHI
- NFLX, SYMC, COH, BIG, RSH, APD, ARMH
The dollar is lower vs. the euro today, and that is helping the CRB commodity index gain 0.4%. Oil prices are higher to $103.75 while gold prices have risen to $1646. Gold hasnt' been able to get above that $1650 level in awhile.
The 10-year yield is getting a small bounce to 1.96%. And the VIX is down 2% to 18.56 after spiking to the 20 level yesterday before reversing lower.
Trading comment: All eyes will be on Apple (AAPL) tonight. The stock is down again today on weak activation numbers out of T-mobile. I feel like the big pullback from recent highs has lowered expectations sufficiently going into the earnings report that AAPL should trade okay following the report. If the stock had continued to run ahead of the earnings report, I would be much more worried about a plunge on any disappointing numbers. But at current levels I feel there is at least a little bit of a margin on safety in the stock given that it remains very cheap on a P/E and PEG basis.
KAM Advisors has long positions in AAPL, MMM, and UTX; short NFLX
23 Nisan 2012 Pazartesi
Monday Morning Musings
Markets are down sharply this morning on continued concerns about Europe as well as sluggish economic data from China.
Asian markets were lower overnight after HSBC said China's manufacturing PMI for April rose slightly to 49.1 from 48.3 last month. But the reading is still below the 50 level that marks the difference between expansion and contraction in the economy.
Europe's markets are also down a lot this morning amid news that budget talks in the Netherlands fell apart. This combined with potential shakeup in France's political makeup has investors worried about how the eurozone will hold it together to tackle their fiscal issues. Additionally, PMI readings out of France and Germany were disappointing.
The flight-to-safety trade is on this morning, although it is not including gold. The dollar is higher vs. the euro, and that is hurting commodities. Gold prices are lower to $1630 and oil prices are down below $102. Silver and copper prices are lower as well.
The 10-year yield is plunging as investors pile into Treasuries. The yield is down to 1.91%. And the VIX is surging near 15% to the 20 level.
In earnings news, stocks are showing mixed reactions to earnings reports.
Stocks rising on earnings reports:
KAM Advisors has long positions in CHKP
Asian markets were lower overnight after HSBC said China's manufacturing PMI for April rose slightly to 49.1 from 48.3 last month. But the reading is still below the 50 level that marks the difference between expansion and contraction in the economy.
Europe's markets are also down a lot this morning amid news that budget talks in the Netherlands fell apart. This combined with potential shakeup in France's political makeup has investors worried about how the eurozone will hold it together to tackle their fiscal issues. Additionally, PMI readings out of France and Germany were disappointing.
The flight-to-safety trade is on this morning, although it is not including gold. The dollar is higher vs. the euro, and that is hurting commodities. Gold prices are lower to $1630 and oil prices are down below $102. Silver and copper prices are lower as well.
The 10-year yield is plunging as investors pile into Treasuries. The yield is down to 1.91%. And the VIX is surging near 15% to the 20 level.
In earnings news, stocks are showing mixed reactions to earnings reports.
Stocks rising on earnings reports:
- EAT, BEAV, STI
- COP, CHL, K, CHKP
KAM Advisors has long positions in CHKP
20 Nisan 2012 Cuma
Stocks Try To Close Out Week On A Positive Note
The markets are higher in early trading after another batch of better than expected earnings reports and some renewed buying interest in Europe.
Earnings reports have continued to come in fast and furious. As I scan the reactions to earnings announcements among stocks this morning, I'm seeing a lot more positive reactions than negative ones. Although there were some disappointments as well.
Stocks rising on earnings results include:
The dollar is lower vs. the euro today, and that is helping commodities. Oil prices are higher above $104, and gold prices are higher to $1645. Copper prices are up today also.
The 10-year yield is getting a small bounce, rising to 1.99%. But the VIX is seeing a big plunge today, down -7% to 17.0 which is just below the 50-day average. Today is options expiration which could be exacerbating some of the trading in the options market today.
Trading comment: The S&P 500 is currently in position to finish the week on a positive note. But trading has been choppy, and the days when the market has been higher have not been accompanied by the usual rise in volume that the bulls look for. In this situation, we like to focus those names that have beaten earnings and seen big pops in their stock. Those are usually the stocks where demand will remain strong and investors can use upcoming dips and pullback in said names to add to their positions. We don't want to bottom fish in the laggards in hopes that they play catch up.
KAM Advisors has long positions in HON, MCD, BGS, DLR, EXPD
Earnings reports have continued to come in fast and furious. As I scan the reactions to earnings announcements among stocks this morning, I'm seeing a lot more positive reactions than negative ones. Although there were some disappointments as well.
Stocks rising on earnings results include:
- MSFT, HON, GE, MCD, COF, UA, SLB, VMI, BGS
- DLR, EXPD, CMG, SNDK, TPX, RVBD
The dollar is lower vs. the euro today, and that is helping commodities. Oil prices are higher above $104, and gold prices are higher to $1645. Copper prices are up today also.
The 10-year yield is getting a small bounce, rising to 1.99%. But the VIX is seeing a big plunge today, down -7% to 17.0 which is just below the 50-day average. Today is options expiration which could be exacerbating some of the trading in the options market today.
Trading comment: The S&P 500 is currently in position to finish the week on a positive note. But trading has been choppy, and the days when the market has been higher have not been accompanied by the usual rise in volume that the bulls look for. In this situation, we like to focus those names that have beaten earnings and seen big pops in their stock. Those are usually the stocks where demand will remain strong and investors can use upcoming dips and pullback in said names to add to their positions. We don't want to bottom fish in the laggards in hopes that they play catch up.
KAM Advisors has long positions in HON, MCD, BGS, DLR, EXPD
19 Nisan 2012 Perşembe
Positive Reactions To Earnings Rolling In
The market was lower in early trading after some economic data came out that was less robust than expected. But the positive reaction to earnings reports seems to be pulling things higher, and the markets quickly got back into positive territory.
In economic news, the Philly Fed Survey for April fell to 8.5 from 12.5 in the prior month. Also, existing home sales fell to an annualized pace of 4.48 million units during March, but that is down from a pace of 4.60 million units last month. Initial jobless claims for the week were also a little higher than expected.
In earnings news, we are getting into the thick of earnings seasons with lots and lots of companies reporting results.
Stocks showing positive reactions to earnings:
The weaker economic data is helping push yields lower, with the 10-year yield down to 1.96%. And the VIX is lower by more than 3% so far, pushing it down to the 18 level and very near its 50-day average.
Trading comment: Earnings reports have been strong for the most part, and that will keep folks bullish about stocks. The fears about deterioration in Europe are still present, although the solid bond auctions in Spain and France have pushed those concerns to the back burner for the moment. But CDS prices in Germany continue to rise, so stresses remain. I expect individual stock leaders to hold up well on a relative basis, but I do not think investors will escape the late spring and summer months without a pickup in volatility.
KAM Advisors has long positions in KMP, EMC, QCOM, UNH, and VZ
In economic news, the Philly Fed Survey for April fell to 8.5 from 12.5 in the prior month. Also, existing home sales fell to an annualized pace of 4.48 million units during March, but that is down from a pace of 4.60 million units last month. Initial jobless claims for the week were also a little higher than expected.
In earnings news, we are getting into the thick of earnings seasons with lots and lots of companies reporting results.
Stocks showing positive reactions to earnings:
- EBAY, FFIV, AXP, TRV, VZ, MS, KMP, and UNH
- QCOM, EMC, NVE, TZOO
The weaker economic data is helping push yields lower, with the 10-year yield down to 1.96%. And the VIX is lower by more than 3% so far, pushing it down to the 18 level and very near its 50-day average.
Trading comment: Earnings reports have been strong for the most part, and that will keep folks bullish about stocks. The fears about deterioration in Europe are still present, although the solid bond auctions in Spain and France have pushed those concerns to the back burner for the moment. But CDS prices in Germany continue to rise, so stresses remain. I expect individual stock leaders to hold up well on a relative basis, but I do not think investors will escape the late spring and summer months without a pickup in volatility.
KAM Advisors has long positions in KMP, EMC, QCOM, UNH, and VZ
18 Nisan 2012 Çarşamba
How Long Can U.S. Markets Igonre Spain?
The markets are slightly lower in early trading after a surprisingly strong rally yesterday. I was surprised by the strength of the rally yesterday, given that bond yields are rising in Spain, CDS prices have been rising across the eurozone, and comments from the IMF have highlighted the deteriorating situation in peripheral Europe. I wonder how long our markets can ignore this news?
But don't let me rain on anyone's parade. Asian markets were up across the board overnight, following the strong rally here yesterday. But Europe is lower again this morning, with Spain down another -3%.
In earnings news, there were a handful of companies reporting better than expected earnings. Stocks moving higher after reporting include: PNC, SYK, STX, HAL, and ISRG. IBM, INTC, and BLK also topped estimates but their stocks are lower today. I have not seen any notable stocks that are down a lot on earnings.
On the M&A front, SXCI said it will buy CHSI and its stock is up 8% on the news. Consolidation continues in the PBM industry.
The dollar is higher this morning vs. the euro, which is weighing on commodities. Gold prices are lower near $1644. Silver and copper prices are lower also. And oil prices have pulled back to $103.
The 10-year yield continues to struggle with that 2.00% level, currently at 1.98%. And the VIX is up 2% this morning after bouncing off its 50-day support yesterday (18.95).
Trading comment: Yesterday's action took the S&P 500 back above its 50-day average. I think a couple of closes above that level puts the bulls back in charge of the tape. I would also like to see a follow-through rally with some volume accompanying it to show me there is some conviction. If the SPX fades back below the 50-day, then we will be back in correction mode. The news out of Europe remains troubling, and I am trying to be mindful for the potential of another flare up like we had last summer with Greece. But the market continues to climb the proverbial wall of worry.
KAM Advisors has long positions in HAL, IBM, and SXCI
But don't let me rain on anyone's parade. Asian markets were up across the board overnight, following the strong rally here yesterday. But Europe is lower again this morning, with Spain down another -3%.
In earnings news, there were a handful of companies reporting better than expected earnings. Stocks moving higher after reporting include: PNC, SYK, STX, HAL, and ISRG. IBM, INTC, and BLK also topped estimates but their stocks are lower today. I have not seen any notable stocks that are down a lot on earnings.
On the M&A front, SXCI said it will buy CHSI and its stock is up 8% on the news. Consolidation continues in the PBM industry.
The dollar is higher this morning vs. the euro, which is weighing on commodities. Gold prices are lower near $1644. Silver and copper prices are lower also. And oil prices have pulled back to $103.
The 10-year yield continues to struggle with that 2.00% level, currently at 1.98%. And the VIX is up 2% this morning after bouncing off its 50-day support yesterday (18.95).
Trading comment: Yesterday's action took the S&P 500 back above its 50-day average. I think a couple of closes above that level puts the bulls back in charge of the tape. I would also like to see a follow-through rally with some volume accompanying it to show me there is some conviction. If the SPX fades back below the 50-day, then we will be back in correction mode. The news out of Europe remains troubling, and I am trying to be mindful for the potential of another flare up like we had last summer with Greece. But the market continues to climb the proverbial wall of worry.
KAM Advisors has long positions in HAL, IBM, and SXCI
One-on-One with Governor Mitt Romney
In my latest interview with former Governor Mitt Romney, he emphatically defends his own business success against Obama’s class warfare/Buffett Rule/Romney Rule attacks. Don’t look for Mitt to back off from his free enterprise vision.
He also told me he will go after HUD and DOE for budget cuts and consolidation, along with a slew of other agency cuts. He will also roll back tax deductions for upper-earners while he lowers marginal rates by 20 percent across-the-board. He does not want more stimulus from the Fed. Thinks blaming speculators for high energy prices is completely wrong.
He would roll up his sleeves to deal with taxmageddon immediately during his transition if elected. And wants his Veep to be able to lead the country as president if that were necessary. He believes women can meet that requirement as well as men. Take a listen:
He also told me he will go after HUD and DOE for budget cuts and consolidation, along with a slew of other agency cuts. He will also roll back tax deductions for upper-earners while he lowers marginal rates by 20 percent across-the-board. He does not want more stimulus from the Fed. Thinks blaming speculators for high energy prices is completely wrong.
He would roll up his sleeves to deal with taxmageddon immediately during his transition if elected. And wants his Veep to be able to lead the country as president if that were necessary. He believes women can meet that requirement as well as men. Take a listen:
17 Nisan 2012 Salı
Can Bulls Keep Their Foot On The Gas?
The market is rallying in early trading as the bulls try to keep this correction short in nature. Market leader AAPL has plunged over the last few days but today it is reversing higher and is currently up 3% on the session trying to recapture the $600 level.
In earnings news, there were some positive reports from bellwethers such as Coke (KO), Goldman Sachs (GS), and JNJ. All of those companies beat earnings estimates and their stocks are higher so far.
Asian markets were mostly lower overnight, led by China (-1.0%) after it announced that foreign direct investment fell 2.8% yr/yr. India was higher last night after the Reserve Bank of India cut its overnight rate in a surprise 50 bps cut to 8.00%.
Europe's markets are all higher this morning after strong demand for Spain's recent bond offering. This is no doubt helping sentiment in the U.S, where concerns over Spain have been rising. But Spain's auction of 3.2 billion euros of 12- and 18-month bills are within the maturities of the ECB's LTRO, so I don't think it's a true gauge of demand. I want to see if there is the same demand among investors when they auction new 10-year notes.
The dollar is a little lower vs. the euro, and commodities are mixed. Oil prices are higher near $104.70 while gold prices are slightly weaker to $1646.
The 10-year is getting a small boost back to the 2.00% level. And the VIX is plunging on this early rally, down -9% to 17.75 which is still above its 50-day average.
Trading comment: The S&P 500 closed back below its 50-day last night, and looked like that would lead to a deeper correction. But this market likes to keep investors on their toes and leaning the wrong way, so this morning it has shot back above that 50-day average. This is a battleground right now, and if the SPX can log a couple of closes above it (1377) I would have to give the benefit of the doubt to the bulls. We added to our shorts and hedges in recent days, and those positions will have to be reconsidered if this strength continues. But something tells me it might not be that easy.
In earnings news, there were some positive reports from bellwethers such as Coke (KO), Goldman Sachs (GS), and JNJ. All of those companies beat earnings estimates and their stocks are higher so far.
Asian markets were mostly lower overnight, led by China (-1.0%) after it announced that foreign direct investment fell 2.8% yr/yr. India was higher last night after the Reserve Bank of India cut its overnight rate in a surprise 50 bps cut to 8.00%.
Europe's markets are all higher this morning after strong demand for Spain's recent bond offering. This is no doubt helping sentiment in the U.S, where concerns over Spain have been rising. But Spain's auction of 3.2 billion euros of 12- and 18-month bills are within the maturities of the ECB's LTRO, so I don't think it's a true gauge of demand. I want to see if there is the same demand among investors when they auction new 10-year notes.
The dollar is a little lower vs. the euro, and commodities are mixed. Oil prices are higher near $104.70 while gold prices are slightly weaker to $1646.
The 10-year is getting a small boost back to the 2.00% level. And the VIX is plunging on this early rally, down -9% to 17.75 which is still above its 50-day average.
Trading comment: The S&P 500 closed back below its 50-day last night, and looked like that would lead to a deeper correction. But this market likes to keep investors on their toes and leaning the wrong way, so this morning it has shot back above that 50-day average. This is a battleground right now, and if the SPX can log a couple of closes above it (1377) I would have to give the benefit of the doubt to the bulls. We added to our shorts and hedges in recent days, and those positions will have to be reconsidered if this strength continues. But something tells me it might not be that easy.
16 Nisan 2012 Pazartesi
Monday Morning Musings: The Streak Is Over
The market opened higher this morning, but quickly reversed such that the S&P 500 and Nasdaq have reversed into negative territory. But the Dow is still higher as industrials and financials outperform.
The Nasdaq was lower last week which ended its winning streak at 14 weeks. My tracking spreadsheet doesn't go back far enough to show another streak that has lasted that long, but maybe someone else can tell me the last time that occurred.
Apple (AAPL) and Priceline (PCLN) have both rolled over this morning, and Google (GOOG) has broken below its 50-day average. So the Nazz continues to correct and is lagging all of the other major indexes this morning.
Asian markets were lower across the board overnight. I would have expected Europe to be lower, but their markets are actually positive despite Spanish yields moving back above the 6.00% level.
In economic news, retail sales came in better than expected at 0.8% for March, well above the 0.3% estimate. But the Housing Market Index for April fell to 25 from 28 the prior month. It was the first drop in 7 months, but I have heard of weakness in other indexes as well.
In earnings, Citi (C) reported disappointing earnings results but its stock is still higher on the session. This is the opposite reaction we saw last week in JPM and WFC who beat estimates but their stocks fell. All of the above financials are higher today.
The euro is lower vs. the dollar today, which is weighing on commodities. Oil prices are slightly lower near $102, and gold has pulled back to $1650.
The 10-year yield is sinking further to 1.96%. And the VIX had bounced above the 20 level on the early reversal in stocks this morning, but is has since eased back a little to 19.53.
Trading comment: I don't like big up opens in the market that are quickly sold. That is not bullish action. Speaking of bullish action, last week's rally attempts came on lighter volume vs. the down days in the market, so we need to see that pattern reverse. Bulls will want to see the market rally on rising volume, not falling. We have also lost the AAPL/PCLN leadership combo in the Nasdaq. My guess is the S&P is going to take the lead for a bit, but big picture I think the market needs to spend some more time consolidating its multi-month runup over the last several months and that doesn't happen overnight. The wildcard is obviously Europe. If Spanish yields continue to rise and the market gets spooked, then we could see a deeper correction like we did last year.
KAM Advisors has long positions in AAPL, GOOG, JPM, PCLN, and WFC
The Nasdaq was lower last week which ended its winning streak at 14 weeks. My tracking spreadsheet doesn't go back far enough to show another streak that has lasted that long, but maybe someone else can tell me the last time that occurred.
Apple (AAPL) and Priceline (PCLN) have both rolled over this morning, and Google (GOOG) has broken below its 50-day average. So the Nazz continues to correct and is lagging all of the other major indexes this morning.
Asian markets were lower across the board overnight. I would have expected Europe to be lower, but their markets are actually positive despite Spanish yields moving back above the 6.00% level.
In economic news, retail sales came in better than expected at 0.8% for March, well above the 0.3% estimate. But the Housing Market Index for April fell to 25 from 28 the prior month. It was the first drop in 7 months, but I have heard of weakness in other indexes as well.
In earnings, Citi (C) reported disappointing earnings results but its stock is still higher on the session. This is the opposite reaction we saw last week in JPM and WFC who beat estimates but their stocks fell. All of the above financials are higher today.
The euro is lower vs. the dollar today, which is weighing on commodities. Oil prices are slightly lower near $102, and gold has pulled back to $1650.
The 10-year yield is sinking further to 1.96%. And the VIX had bounced above the 20 level on the early reversal in stocks this morning, but is has since eased back a little to 19.53.
Trading comment: I don't like big up opens in the market that are quickly sold. That is not bullish action. Speaking of bullish action, last week's rally attempts came on lighter volume vs. the down days in the market, so we need to see that pattern reverse. Bulls will want to see the market rally on rising volume, not falling. We have also lost the AAPL/PCLN leadership combo in the Nasdaq. My guess is the S&P is going to take the lead for a bit, but big picture I think the market needs to spend some more time consolidating its multi-month runup over the last several months and that doesn't happen overnight. The wildcard is obviously Europe. If Spanish yields continue to rise and the market gets spooked, then we could see a deeper correction like we did last year.
KAM Advisors has long positions in AAPL, GOOG, JPM, PCLN, and WFC
13 Nisan 2012 Cuma
Keep A Close Eye On Spain
The market is lower this morning, despite positive action in Asia overnight and a host of better than expected earnings reports.
Asian markets were up across the board last night even though China posted a GDP number that was below expectations. Chinese GDP for Q1 is estimated to have grown 8.1%, which is below the 8.4% expected. Most likely the reason Asian markets didn't selloff is that investors expect lower GDP for China to give the govt. cover to ease monetary policy more.
The good mood in Asian overnight didn't carryover to Europe this morning, where markets are down. The big concern once again is Spain, where bong yields have been rising recently and stocks have been swooning. Recent data shows that net borrowing by Spanish banks from the ECB surged to 228 billion euros in March from 152 billion in February. If Spain spirals out of control like Greece I would expect global markets to come under pressure.
In economic news in the US, the Univ. of Michigan Consumer Sentiment survey declined to 75.7 in April from 76.2 the prior month. But April's decline was the first in the survey since August 2011.
The dollar is rallying vs. the euro today, and that is weighing on commodities. Oil prices have fallen back to $103 and gold prices are lower near $1668. Copper and silver prices are lower as well.
The 10-year yield is back below the 2.00% level at 1.99%. And the VIX is up 9% to 18.75. I suspect if the market continues to selloff we will see the VIX get back above the 20 level.
Trading comment: There is an old adage in the market that says its not the news that's important, its the reaction in the stock. So it is not a very good sign that all of the companies that beat estimates last night (JPM, WFC, and GOOG) are all lower this morning. I don't want to make too much out of a single day's action, but if this turns into a trend it won't be good. On Tuesday I said that the market was grossly oversold and due for a bounce. We got that expected bounce the last 2 days, but on relatively light volume. Currently the S&P 500 is testing that 50-day average support again near the 1376 level. If we can't hold that support, it is likely that the market will correct more.
KAM Advisors has long positions in GOOG, JPM, and WFC
Asian markets were up across the board last night even though China posted a GDP number that was below expectations. Chinese GDP for Q1 is estimated to have grown 8.1%, which is below the 8.4% expected. Most likely the reason Asian markets didn't selloff is that investors expect lower GDP for China to give the govt. cover to ease monetary policy more.
The good mood in Asian overnight didn't carryover to Europe this morning, where markets are down. The big concern once again is Spain, where bong yields have been rising recently and stocks have been swooning. Recent data shows that net borrowing by Spanish banks from the ECB surged to 228 billion euros in March from 152 billion in February. If Spain spirals out of control like Greece I would expect global markets to come under pressure.
In economic news in the US, the Univ. of Michigan Consumer Sentiment survey declined to 75.7 in April from 76.2 the prior month. But April's decline was the first in the survey since August 2011.
The dollar is rallying vs. the euro today, and that is weighing on commodities. Oil prices have fallen back to $103 and gold prices are lower near $1668. Copper and silver prices are lower as well.
The 10-year yield is back below the 2.00% level at 1.99%. And the VIX is up 9% to 18.75. I suspect if the market continues to selloff we will see the VIX get back above the 20 level.
Trading comment: There is an old adage in the market that says its not the news that's important, its the reaction in the stock. So it is not a very good sign that all of the companies that beat estimates last night (JPM, WFC, and GOOG) are all lower this morning. I don't want to make too much out of a single day's action, but if this turns into a trend it won't be good. On Tuesday I said that the market was grossly oversold and due for a bounce. We got that expected bounce the last 2 days, but on relatively light volume. Currently the S&P 500 is testing that 50-day average support again near the 1376 level. If we can't hold that support, it is likely that the market will correct more.
KAM Advisors has long positions in GOOG, JPM, and WFC
GE's Jack Welch Blasts Obama's Leadership
President Obama’s “divide-and-conquer” approach isn’t what great leaders do, Jack Welch said Thursday on “The Kudlow Report”.
The renowned former General Electric CEO chided the president for blaming others for economic woes.
“It was the insurance executives in health care. It was the bankers in the collapse. It was the oil companies as oil prices go up. It was Congress if things didn’t go the way he wanted. And recently it’s been the Supreme Court,” he said.
“He’s got an enemies list that would make Richard Nixon proud.”
Welch, who helmed GE for 21 years and founded the Jack Welch Management Institute at Strayer University, penned an op-ed article for Reuters with wife Suzy Welch this week in which he tackled the idea of Obama’s enemies list.
“Surely his supporters must think this particular tactic is effective, but there can be no denying that the country is more polarized than when Obama took office,” Welch wrote, making a case for presumptive Republican presidential nominee Mitt Romney.
“Without doubt, Romney is not the model leader (his apparent lack of authenticity can be jarring), but he has a quality that would serve him well as president — good old American pragmatism,” he wrote. “Perhaps that’s the businessman in him. Or perhaps you just learn to do what you’ve got to do when you’re a GOP governor in the People’s Republic of Massachusetts or the man charged with salvaging the scandal-ridden Salt Lake City Olympics. If Romney’s long record suggests anything, it’s that he knows how to manage people and organizations to get things accomplished without a lot of internecine warfare.”
In 1981, Welch became GE’s youngest CEO, and increased its market value by $387 billion, making it the world’s most valuable company. But the move came in part by slashing GE’s workforce by more than 100,000 workers, earning him the nickname he despised, “Neutron Jack,” a reference to the bomb designed to eliminate people while leaving buildings intact.
Welch argued that “great leaders are interested in coalescing” the way they would run a company.
“You don’t have one division pinned against the other,” he said. “You try to get the whole company pull together.”
I asked him whether he thought Romney could win the White House. “Absolutely,” he said. “It’d be great for the country. We’d be a stronger country. We’d have more jobs. We’d have more people getting a piece of the pie. And we wouldn’t have this divisive nature that we have with this president, screaming at one group and then screaming at the next group in a high-pitched voice.
“He was in Florida this week screaming and yelling about rich people. He went after the Supreme Court. We’ve got to stop this, Larry.”
Earlier in the interview, Welch said he was seeing modest growth in short-cycle sectors such as food and chemicals, along with “real strength” in non-residential construction and infrastructure.
“While the economy was strong, it wasn’t accelerating the way I thought it would after the fourth quarter,” he said.
Tailwinds included consumer confidence and the Federal Reserve.
“On the negative side, though, we’ve got gasoline prices, we’ve got Europe, we don’t know where China is going and we’ve got tax increases right around the corner,” he said.
The renowned former General Electric CEO chided the president for blaming others for economic woes.
“It was the insurance executives in health care. It was the bankers in the collapse. It was the oil companies as oil prices go up. It was Congress if things didn’t go the way he wanted. And recently it’s been the Supreme Court,” he said.
“He’s got an enemies list that would make Richard Nixon proud.”
Welch, who helmed GE for 21 years and founded the Jack Welch Management Institute at Strayer University, penned an op-ed article for Reuters with wife Suzy Welch this week in which he tackled the idea of Obama’s enemies list.
“Surely his supporters must think this particular tactic is effective, but there can be no denying that the country is more polarized than when Obama took office,” Welch wrote, making a case for presumptive Republican presidential nominee Mitt Romney.
“Without doubt, Romney is not the model leader (his apparent lack of authenticity can be jarring), but he has a quality that would serve him well as president — good old American pragmatism,” he wrote. “Perhaps that’s the businessman in him. Or perhaps you just learn to do what you’ve got to do when you’re a GOP governor in the People’s Republic of Massachusetts or the man charged with salvaging the scandal-ridden Salt Lake City Olympics. If Romney’s long record suggests anything, it’s that he knows how to manage people and organizations to get things accomplished without a lot of internecine warfare.”
In 1981, Welch became GE’s youngest CEO, and increased its market value by $387 billion, making it the world’s most valuable company. But the move came in part by slashing GE’s workforce by more than 100,000 workers, earning him the nickname he despised, “Neutron Jack,” a reference to the bomb designed to eliminate people while leaving buildings intact.
Welch argued that “great leaders are interested in coalescing” the way they would run a company.
“You don’t have one division pinned against the other,” he said. “You try to get the whole company pull together.”
I asked him whether he thought Romney could win the White House. “Absolutely,” he said. “It’d be great for the country. We’d be a stronger country. We’d have more jobs. We’d have more people getting a piece of the pie. And we wouldn’t have this divisive nature that we have with this president, screaming at one group and then screaming at the next group in a high-pitched voice.
“He was in Florida this week screaming and yelling about rich people. He went after the Supreme Court. We’ve got to stop this, Larry.”
Earlier in the interview, Welch said he was seeing modest growth in short-cycle sectors such as food and chemicals, along with “real strength” in non-residential construction and infrastructure.
“While the economy was strong, it wasn’t accelerating the way I thought it would after the fourth quarter,” he said.
Tailwinds included consumer confidence and the Federal Reserve.
“On the negative side, though, we’ve got gasoline prices, we’ve got Europe, we don’t know where China is going and we’ve got tax increases right around the corner,” he said.
12 Nisan 2012 Perşembe
Fickle Fun
I'm now in Missoula, Montana. Mark Sundeen, his fiance, Cedar, and I have been on the road together, doing this book tour thingy in Los Angeles, Colorado (Grand Junction, Durango, Paonia, Telluride), and Utah (Moab, Salt Lake City) for the past few weeks, with a few radio interviews sprinkled in. We've been amazed at the attendance, reception and open-heartedness of people at all the events, so far - with hugs and tears. Mark and I have also been running into long lost friends coming out of the woodwork through all this.
We even stayed with Mark's family in LA, and I've finally been able to learn more about Mark's life. Not so one-sided as it's been ;-)
Then my family. My parents even attended at the Grand Junction, Colorado presentation at the library. I felt very moved seeing them there, and hearing their comments. The Man Who Quit Money contains things I previously only told my closest friends and family, so I was feeling quite vulnerable having it published for all the world to read. And I was feeling most nervous about how my parents would receive it, even though we had discussed most everything in it. But they keep proving, over and over, their unconditional love.
We are getting ready to do our northwestern tour. We have a reprieve in Missoula until April 18th, the Quit Money Day panel discussion here at the Missoula Public Library. After that we head west, doing book events up and down the west coast, including Portland, Seattle, and possibly San Francisco. We scratched Vancouver off our list since I can't cross the border legally without any form of ID.
I'll try to list the dates and times of upcoming events when they are confirmed.
So how am I taking this personally?
Over the past couple years, as Mark was writing the book, I was wary of my own ego, how I'd handle all this. But then I just decided it's like everything in life: accept it and enjoy it as it comes, then let it pass. The funny thing about experiencing this as I'm older (soon to be 51) is that I have a strong sense of the fickle impermanence of life--my own mortality. Our earth is a teeny-tiny, passing vapor in a galaxy that takes millions of years to make a single revolution. Honestly, this really doesn't feel like such a big deal as I'd thought it would. But it's fun, and why should it not be? Like everybody, I've had too many childhood dreams at night of being a big star or a hero, to wake up and realize it was a fickle dream. And I would wake up to a new day as just a child, no longer a hero, but could now romp and skip with neighbor kids, and with my brothers and my sister in the woods. Enjoy time in the spotlight, enjoy watching it pass away - that's what dreams are for. "Everything is beautiful in its time," and we realize this when we don't cling, don't possess. We then know the blooming of a flower is no less beautiful than its wilting, its bowing to the ground, releasing seeds for another spring, another generation. Okay, I'm getting maybe too romantic here. Life sucks too. But the suckiness of life is part of the fun, too, when savored, like delicious hot burning peppers in Mexican food, and makes for the best stories to tell grand kids.
My computer time is unpredictable these days, and usually not much time, so maybe I'll start writing shorter blog posts, more frequently?
We even stayed with Mark's family in LA, and I've finally been able to learn more about Mark's life. Not so one-sided as it's been ;-)
Then my family. My parents even attended at the Grand Junction, Colorado presentation at the library. I felt very moved seeing them there, and hearing their comments. The Man Who Quit Money contains things I previously only told my closest friends and family, so I was feeling quite vulnerable having it published for all the world to read. And I was feeling most nervous about how my parents would receive it, even though we had discussed most everything in it. But they keep proving, over and over, their unconditional love.
We are getting ready to do our northwestern tour. We have a reprieve in Missoula until April 18th, the Quit Money Day panel discussion here at the Missoula Public Library. After that we head west, doing book events up and down the west coast, including Portland, Seattle, and possibly San Francisco. We scratched Vancouver off our list since I can't cross the border legally without any form of ID.
I'll try to list the dates and times of upcoming events when they are confirmed.
So how am I taking this personally?
Over the past couple years, as Mark was writing the book, I was wary of my own ego, how I'd handle all this. But then I just decided it's like everything in life: accept it and enjoy it as it comes, then let it pass. The funny thing about experiencing this as I'm older (soon to be 51) is that I have a strong sense of the fickle impermanence of life--my own mortality. Our earth is a teeny-tiny, passing vapor in a galaxy that takes millions of years to make a single revolution. Honestly, this really doesn't feel like such a big deal as I'd thought it would. But it's fun, and why should it not be? Like everybody, I've had too many childhood dreams at night of being a big star or a hero, to wake up and realize it was a fickle dream. And I would wake up to a new day as just a child, no longer a hero, but could now romp and skip with neighbor kids, and with my brothers and my sister in the woods. Enjoy time in the spotlight, enjoy watching it pass away - that's what dreams are for. "Everything is beautiful in its time," and we realize this when we don't cling, don't possess. We then know the blooming of a flower is no less beautiful than its wilting, its bowing to the ground, releasing seeds for another spring, another generation. Okay, I'm getting maybe too romantic here. Life sucks too. But the suckiness of life is part of the fun, too, when savored, like delicious hot burning peppers in Mexican food, and makes for the best stories to tell grand kids.
My computer time is unpredictable these days, and usually not much time, so maybe I'll start writing shorter blog posts, more frequently?
Early Look: Waiting On Google
The market is pushing higher in early trading, adding to its oversold bounce that started yesterday. The S&P 500 is back above its 50-day average, which comes back into play around 1374. Bulls will be looking for the index to hold above that level.
In earnings news, tech giant Google (GOOG) reports earnings after the close tonight. Consensus estimates are for EPS of $9.64 on revenues of $10.58 billion. Last quarter, GOOG missed estimates with its earnings report and the stock gapped lower the next day. Let's hope they have a better handle on their financials this time. The stock is trading at roughly 15x 2012 estimated earnings, so it's not very expensive at current levels.
In economic news, core PPI data showed a 0.3% increase month over month, slightly above expectations. Also, jobless claims came in higher than expected at 380,000. But continuing claims declined.
Overnight Asian markets were higher, led by a 1.8% bounce in China. Europe's markets are mostly lower this morning.
The euro is higher vs. the dollar, which is helping commodities. Oil prices are rallying to $103.80, and gold prices are up to $1676. Copper and silver prices are getting a pop as well.
The 10-year yield is up a touch to 2.03%; and the VIX is down -8% currently to 18.41. Yesterday's early dip in the VIX reversed itself by the close and the VIX rallied back up to 20. We'll see if it can stay down on day 2.
Trading comment: Yesterday's bounce came on somewhat lighter volume, but it was still a good rally attempt. Bulls will be watching for some follow through to come on higher volume, and also for one of the minor growth indexes (like the S&P midcap 400) to recapture its 50-day average. Most leading growth stocks haven't had too much damage on the charts and are consolidating. LNKD is close to breaking out again, and could benefit from the social media hype that is picking up as Facebook readies for their IPO next month.
KAM Advisors has long positions in GOOG and LNKD
In earnings news, tech giant Google (GOOG) reports earnings after the close tonight. Consensus estimates are for EPS of $9.64 on revenues of $10.58 billion. Last quarter, GOOG missed estimates with its earnings report and the stock gapped lower the next day. Let's hope they have a better handle on their financials this time. The stock is trading at roughly 15x 2012 estimated earnings, so it's not very expensive at current levels.
In economic news, core PPI data showed a 0.3% increase month over month, slightly above expectations. Also, jobless claims came in higher than expected at 380,000. But continuing claims declined.
Overnight Asian markets were higher, led by a 1.8% bounce in China. Europe's markets are mostly lower this morning.
The euro is higher vs. the dollar, which is helping commodities. Oil prices are rallying to $103.80, and gold prices are up to $1676. Copper and silver prices are getting a pop as well.
The 10-year yield is up a touch to 2.03%; and the VIX is down -8% currently to 18.41. Yesterday's early dip in the VIX reversed itself by the close and the VIX rallied back up to 20. We'll see if it can stay down on day 2.
Trading comment: Yesterday's bounce came on somewhat lighter volume, but it was still a good rally attempt. Bulls will be watching for some follow through to come on higher volume, and also for one of the minor growth indexes (like the S&P midcap 400) to recapture its 50-day average. Most leading growth stocks haven't had too much damage on the charts and are consolidating. LNKD is close to breaking out again, and could benefit from the social media hype that is picking up as Facebook readies for their IPO next month.
KAM Advisors has long positions in GOOG and LNKD
11 Nisan 2012 Çarşamba
Trying To End The Losing Streak
The S&P 500 is coming off its longest losing streak since last November at 5 days. The market is bouncing in early trading, with the SPX trying to regain its now overhead 50-day average.
Overnight trading was weak in Asia following weak action in US markets and lingering concerns about sovereign European debt. But the action in Europe took a decidedly positive tone this morning after a successful auction of short-term bills in Italy. This helped drive yields lower across the periphery of Europe.
In corporate news, Alcoa kicked off earnings season last night with a strong report. AA topped consensus estimates handily and also raised its growth forecast for the global aerospace market.
On the flipside, Nokia lowered Q1 guidance and its stock is getting hit.
The euro is higher this morning, but commodities are mixed. Oil prices are higher near $101.70 while gold prices are slightly weaker at $1660. Copper and silver are also mixed.
The 10-year yield is seeing a little bounce to 2.03%. And the VIX is falling -7.5% this morning below the 19 level as some of yesterday's fear comes out of the market.
Trading comment: A couple of different pictures for the SPX and Nasdaq in terms of their 50-day averages. The SPX broke through its 50-day support yesterday and today is trying to recapture that key support level (watch 1373). As for the COMP, it closed right at its 50-day support yesterday and today is bouncing higher from those levels (watch 2992). Looking at many of the other growth stocks that have been leading the market, most of them are still holding up. A handful have broken below their recent uptrend lines but are still trading above their 50-day averages. That said, yesterday was another distribution day (read: high volume selloff) in the market and adds to the number of distribution days we have seen in recent weeks. As such, traders should be in defensive mode and looking to protect profits and raise cash.
Overnight trading was weak in Asia following weak action in US markets and lingering concerns about sovereign European debt. But the action in Europe took a decidedly positive tone this morning after a successful auction of short-term bills in Italy. This helped drive yields lower across the periphery of Europe.
In corporate news, Alcoa kicked off earnings season last night with a strong report. AA topped consensus estimates handily and also raised its growth forecast for the global aerospace market.
On the flipside, Nokia lowered Q1 guidance and its stock is getting hit.
The euro is higher this morning, but commodities are mixed. Oil prices are higher near $101.70 while gold prices are slightly weaker at $1660. Copper and silver are also mixed.
The 10-year yield is seeing a little bounce to 2.03%. And the VIX is falling -7.5% this morning below the 19 level as some of yesterday's fear comes out of the market.
Trading comment: A couple of different pictures for the SPX and Nasdaq in terms of their 50-day averages. The SPX broke through its 50-day support yesterday and today is trying to recapture that key support level (watch 1373). As for the COMP, it closed right at its 50-day support yesterday and today is bouncing higher from those levels (watch 2992). Looking at many of the other growth stocks that have been leading the market, most of them are still holding up. A handful have broken below their recent uptrend lines but are still trading above their 50-day averages. That said, yesterday was another distribution day (read: high volume selloff) in the market and adds to the number of distribution days we have seen in recent weeks. As such, traders should be in defensive mode and looking to protect profits and raise cash.
10 Nisan 2012 Salı
Readying For A Bounce
The market is lower in early trading, which would mark a rare 5th consecutive down day for the major indexes if we closed at current levels. The S&P 500 is approaching its 50-day average near 1372, having hit 1375 earlier. Interestingly, the Dow, S&P mid-cap, and Russell 2000 are all already below their respective 50-day averages.
The Nazz is outperforming again, being helped by Apple (AAPL) which continues to defy gravity and trade higher to new record highs. Priceline (PCLN) is similarly spectacular but doesn't receive a fraction of the mentions in the media that AAPL does.
There hasn't been much in the way of market moving news this morning. Earnings season kicks off tonight with Alcoa, which is a bit of a bore if you ask me. Later this week we hear from Google, JPMorgan, and Wells Fargo which should all be interesting.
Action in Asia overnight was mixed, with only China gaining on the session after reporting an unexpected trades surplus (imports were weaker than expected). Europe is lower this morning as Italian and Spanish bond yields continue to rise.
The dollar is stronger vs. the euro, and most commodities are pulling back. Oil prices are lower below $102. Gold prices are down near $1638. Silver and copper prices are lower too.
The 10-year yield has once again fallen back below the 2.00% level as investors question the strength of our economic rebound. The VIX is up another 3% to 19.35.
Trading comment: The SPX is getting closer to its 50-day average and I am still expecting a bounce from these levels. Often times a pullback ahead of earnings season sets the market up well to rally if those earnings reports come in at or above expectations. I hope we get a good report from Google on Thursday, as that would help sentiment. The put/call ratio is fairly low this morning at 0.81. I would prefer to see more fear and a reading above 1.0 to help the market bottom. But yesterday we did see a reading above 1.0 by the close, the first such reading in a week.
KAM Advisors has long positions in AAPL, GOOG, PCLN, JPM, and WFC
The Nazz is outperforming again, being helped by Apple (AAPL) which continues to defy gravity and trade higher to new record highs. Priceline (PCLN) is similarly spectacular but doesn't receive a fraction of the mentions in the media that AAPL does.
There hasn't been much in the way of market moving news this morning. Earnings season kicks off tonight with Alcoa, which is a bit of a bore if you ask me. Later this week we hear from Google, JPMorgan, and Wells Fargo which should all be interesting.
Action in Asia overnight was mixed, with only China gaining on the session after reporting an unexpected trades surplus (imports were weaker than expected). Europe is lower this morning as Italian and Spanish bond yields continue to rise.
The dollar is stronger vs. the euro, and most commodities are pulling back. Oil prices are lower below $102. Gold prices are down near $1638. Silver and copper prices are lower too.
The 10-year yield has once again fallen back below the 2.00% level as investors question the strength of our economic rebound. The VIX is up another 3% to 19.35.
Trading comment: The SPX is getting closer to its 50-day average and I am still expecting a bounce from these levels. Often times a pullback ahead of earnings season sets the market up well to rally if those earnings reports come in at or above expectations. I hope we get a good report from Google on Thursday, as that would help sentiment. The put/call ratio is fairly low this morning at 0.81. I would prefer to see more fear and a reading above 1.0 to help the market bottom. But yesterday we did see a reading above 1.0 by the close, the first such reading in a week.
KAM Advisors has long positions in AAPL, GOOG, PCLN, JPM, and WFC
9 Nisan 2012 Pazartesi
Monday Morning Musings
The market is selling off on a delayed reaction to Friday's nonfarm payrolls report. Our markets were closed on Friday so this is the first chance traders have had to react to the news. Nonfarm payrolls grew by 120,000 in March, which was well below expectations for 200k jobs added. The unemployment rate was steady at 8.2%.
Overnight selling in Asia was also affected by concerns about slowing US economic growth. Japan and China were both lower, with China's CPI coming in above expectations at 3.6%. European markets are closed for the Easter holiday.
Bonds are rallying hard on the payrolls data, with prices up and yields plunging. We had begun to see the 10-year yield moving higher from that 2.00% level where it had been stuck for so long. But today we are back down to that key support area with the 10-yr trading near 2.03%.
Not much in the way of corporate news, but AOL (who still owns that stock?) did sell $1 billion worth of patents to Microsoft (MSFT).
Commodities are mixed, despite the dollar being lower. Oil prices are down near $104.40. Gold prices are higher to $1645, but silver and copper prices are down.
The VIX is seeing a big bounce, up 11% so far today back above its 50-day average to 18.60. Looks like we were stopped out of our VXX hedge a little early.
Trading comment: The S&P 500 is down for a fourth straight day, which is about the most consecutive down days we have seen in the index since last November. Currently at 1379, that's about a 3% decline from the recent highs. I have been expecting a mild pullback in the 3-5% range, so we are now in that zone. The 50-day average for the SPX comes into play around 1371 while a full 5% pullback takes the index down to 1350. Of course, we could easily see something more but I think in that area buyers will step in and we will get a bounce. The key to determining if we will get a bigger correction this spring/summer is the tone of the ensuing bounce and if it is able to take the indexes back to new highs or if it runs out of steam and leaves a double-top looking formation. But in the near-term, I would be looking for a bounce in the markets.
Overnight selling in Asia was also affected by concerns about slowing US economic growth. Japan and China were both lower, with China's CPI coming in above expectations at 3.6%. European markets are closed for the Easter holiday.
Bonds are rallying hard on the payrolls data, with prices up and yields plunging. We had begun to see the 10-year yield moving higher from that 2.00% level where it had been stuck for so long. But today we are back down to that key support area with the 10-yr trading near 2.03%.
Not much in the way of corporate news, but AOL (who still owns that stock?) did sell $1 billion worth of patents to Microsoft (MSFT).
Commodities are mixed, despite the dollar being lower. Oil prices are down near $104.40. Gold prices are higher to $1645, but silver and copper prices are down.
The VIX is seeing a big bounce, up 11% so far today back above its 50-day average to 18.60. Looks like we were stopped out of our VXX hedge a little early.
Trading comment: The S&P 500 is down for a fourth straight day, which is about the most consecutive down days we have seen in the index since last November. Currently at 1379, that's about a 3% decline from the recent highs. I have been expecting a mild pullback in the 3-5% range, so we are now in that zone. The 50-day average for the SPX comes into play around 1371 while a full 5% pullback takes the index down to 1350. Of course, we could easily see something more but I think in that area buyers will step in and we will get a bounce. The key to determining if we will get a bigger correction this spring/summer is the tone of the ensuing bounce and if it is able to take the indexes back to new highs or if it runs out of steam and leaves a double-top looking formation. But in the near-term, I would be looking for a bounce in the markets.
7 Nisan 2012 Cumartesi
STOCKS HAVE REACHED THE EUPHORIA STAGE
The last bull ended when the leading stock, GOOG, entered a parabolic "bubble" phase. That was the signal that the bull had reached the euphoria stage. When the GOOG bubble popped it signaled the end of the bull market.
Two stocks, AAPL and PCLN, have been the leaders of this bull market. Both have entered the euphoric "bubble" stage. When the Apple and Priceline parabolas break it will almost certainly signal the end of this bull market.
Apple is now stretched 49% above the 200 day moving average. Anything between 50 and 60% above the mean is extreme dangerous territory.
As I pointed out in my last article the dollar is beginning its second daily cycle up in what could very well be a cyclical bull market. This should correspond with the stock market topping and the next leg down in the secular bear market.
My best guess is that we will see a sharp sell off over the next 2 to 3 weeks, followed by a sharp rebound (QE3?) that may, or may not, move stocks to marginal new highs, similar to the 2007 top.
The poor employment report on Friday is the first warning shot across the bow that the economy is slowing in preparation for moving down into the next recession/depression.
Bernanke is in the same position he was in 2007. Printing more money won't stop the collapse. It will only continue to spike the price of energy and exacerbate the decline.
Two stocks, AAPL and PCLN, have been the leaders of this bull market. Both have entered the euphoric "bubble" stage. When the Apple and Priceline parabolas break it will almost certainly signal the end of this bull market.
Apple is now stretched 49% above the 200 day moving average. Anything between 50 and 60% above the mean is extreme dangerous territory.
As I pointed out in my last article the dollar is beginning its second daily cycle up in what could very well be a cyclical bull market. This should correspond with the stock market topping and the next leg down in the secular bear market.
My best guess is that we will see a sharp sell off over the next 2 to 3 weeks, followed by a sharp rebound (QE3?) that may, or may not, move stocks to marginal new highs, similar to the 2007 top.
The poor employment report on Friday is the first warning shot across the bow that the economy is slowing in preparation for moving down into the next recession/depression.
Bernanke is in the same position he was in 2007. Printing more money won't stop the collapse. It will only continue to spike the price of energy and exacerbate the decline.
5 Nisan 2012 Perşembe
A King Dollar Tax Cut
You wouldn’t know it from falling stocks, but the Fed’s apparent decision to hold off on future bond buying, or QE3, in response to an improving economy may turn out to be a very bullish omen for the equity market and the economy.
In fact, less stimulus from the central bank sets up a potential tax-cut effect. Here’s why: Limits to the Fed’s $3 trillion balance sheet will bolster the value of the dollar.
The beleaguered greenback has fallen roughly 40 percent over the past ten years as a result of the Fed’s interventionist go-stop-go policies. Since the banking crisis of 2008, the dollar has dropped 8 percent.
But as the Fed ended QE2 last year, and as its bond-buying “operation twist” comes to an end in June, the dollar has started rising. In response, gold prices have been falling significantly. Slower money creation will do that.
And along with gold, oil prices are now slipping lower, with West Texas crude approaching $101. Still too high, but much less scary. Wholesale unleaded gas prices also could fall in response to the drop in crude, which might take the pressure off retail gas at the pump. If that’s the case, and the King Dollar scenario plays out, the recent energy-price shock could reverse, imparting a mild tax-cut effect on consumers and businesses.
Although Bernanke & Co. do not target the dollar, a stronger greenback is the surest way to bring down energy and food prices, which all too often have plagued households and the economy.
The Joint Economic Committee has estimated that the cheap dollar has contributed about 45 cents to the rising gas price. Lately, with the drop in crude oil, nationwide gas prices could be starting to level off at just over $3.90 -- even though refiner closings and bottlenecks in some parts of the country have pushed that price much higher.
No, a stronger dollar won’t offset the failure to implement the Keystone Pipeline. But it could provide some motorist relief at the pump.
The point is, if the Fed quits printing new money, the value of dollar money will go up. And the inflation tax will go down. Despite Ben Bernanke’s economic worries, the Fed is beginning to see that the economy is at least growing by roughly 3 percent. That’s not fabulous, but it’s not bad either.
The latest ISM surveys for manufacturing and services, the decent 209,000 ADP employment report for March, and pretty good car sales all suggest that the first-quarter economy was just as good as the fourth-quarter economy. And these economic stats are moving the Fed away from more easing moves. Hence, King Dollar is recovering at least a bit.
The dollar view on the economy and stocks is a minority case, but a very important one that should not be overlooked. During prior stock market booms, particularly in Reagan’s first term and Clinton’s second term, King Dollar rose and gold fell, oil prices came down, and foreign capital sought out dollar investments in the U.S. because of the reliability of the currency.
For investors, a strong dollar helps.
In fact, less stimulus from the central bank sets up a potential tax-cut effect. Here’s why: Limits to the Fed’s $3 trillion balance sheet will bolster the value of the dollar.
The beleaguered greenback has fallen roughly 40 percent over the past ten years as a result of the Fed’s interventionist go-stop-go policies. Since the banking crisis of 2008, the dollar has dropped 8 percent.
But as the Fed ended QE2 last year, and as its bond-buying “operation twist” comes to an end in June, the dollar has started rising. In response, gold prices have been falling significantly. Slower money creation will do that.
And along with gold, oil prices are now slipping lower, with West Texas crude approaching $101. Still too high, but much less scary. Wholesale unleaded gas prices also could fall in response to the drop in crude, which might take the pressure off retail gas at the pump. If that’s the case, and the King Dollar scenario plays out, the recent energy-price shock could reverse, imparting a mild tax-cut effect on consumers and businesses.
Although Bernanke & Co. do not target the dollar, a stronger greenback is the surest way to bring down energy and food prices, which all too often have plagued households and the economy.
The Joint Economic Committee has estimated that the cheap dollar has contributed about 45 cents to the rising gas price. Lately, with the drop in crude oil, nationwide gas prices could be starting to level off at just over $3.90 -- even though refiner closings and bottlenecks in some parts of the country have pushed that price much higher.
No, a stronger dollar won’t offset the failure to implement the Keystone Pipeline. But it could provide some motorist relief at the pump.
The point is, if the Fed quits printing new money, the value of dollar money will go up. And the inflation tax will go down. Despite Ben Bernanke’s economic worries, the Fed is beginning to see that the economy is at least growing by roughly 3 percent. That’s not fabulous, but it’s not bad either.
The latest ISM surveys for manufacturing and services, the decent 209,000 ADP employment report for March, and pretty good car sales all suggest that the first-quarter economy was just as good as the fourth-quarter economy. And these economic stats are moving the Fed away from more easing moves. Hence, King Dollar is recovering at least a bit.
The dollar view on the economy and stocks is a minority case, but a very important one that should not be overlooked. During prior stock market booms, particularly in Reagan’s first term and Clinton’s second term, King Dollar rose and gold fell, oil prices came down, and foreign capital sought out dollar investments in the U.S. because of the reliability of the currency.
For investors, a strong dollar helps.
3 Nisan 2012 Salı
THE BEGINNING OF THE END
As convincing as this rally has been I am confident this is an ending phase and not the start a new secular bull market. Actually the bear market began last year in May but was temporarily aborted by massive central bank printing. Let me explain.
The last four year cycle that started in 2002 and bottomed in 2009 was the longest four year cycle in history. It was stretched to these extreme lengths by Bernanke's desperate strategy of debasing the currency to avoid the bear market that should have begun in 2006. Instead the stock market cycle stretched all the way into the spring of 2009.
I have mentioned before that often a long cycle will be followed by a short cycle. This being the case the current four year cycle should have bottomed in the fall of 2012. That process had begun last summer.
However, central banks around the world, in the futile attempt to avoid a global depression again cranked up the printing presses. The bear market that had begun in May was temporarily aborted. Amazingly I think we are going to see another stretched four year cycle. And this one is going to end just like the last one when the price of oil spikes far enough to collapse the global economy and another market crash. The next economic downturn won't be a Great Recession, it will be a Great Depression.
At the moment the stock market is in a runaway move very similar to what unfolded out of the summer 2006 yearly cycle low. These runaway moves are characterized by uniform mild corrections all of similar magnitude and duration. For this particular rally the corrective size has been roughly 25-35 points. This could continue for weeks or months, but all runaway moves end in the same fashion, with a crash or semi crash that wipes out months of gains in a matter of days or even minutes.
Generally speaking, once a corrective move has run 20% beyond the normal correction size that is the signal that the move is over. Unfortunately, at that point you are usually already into the 'crash day'. This is why at some point one has to say enough is enough, and stand aside, or you risk getting caught in the crash.
When this runaway move comes to an end I'm pretty sure it will signal the beginning of the end for this cyclical bull market. That doesn't mean that we won't see a test or even a marginal break to new highs but I think we are clearly in the final phase of this liquidity driven rally that began in March of 2009.
We are now at the mercy of oil and the commodity markets. Bernanke's plan to print our way to prosperity is destined to failure. Ultimately he is just going to spike inflation and collapse the global economy, resulting in a worse downturn than what we saw in 2008/09.
Whether that breaking point is at $120 oil or $160 oil is anyone's guess.
The last four year cycle that started in 2002 and bottomed in 2009 was the longest four year cycle in history. It was stretched to these extreme lengths by Bernanke's desperate strategy of debasing the currency to avoid the bear market that should have begun in 2006. Instead the stock market cycle stretched all the way into the spring of 2009.
I have mentioned before that often a long cycle will be followed by a short cycle. This being the case the current four year cycle should have bottomed in the fall of 2012. That process had begun last summer.
However, central banks around the world, in the futile attempt to avoid a global depression again cranked up the printing presses. The bear market that had begun in May was temporarily aborted. Amazingly I think we are going to see another stretched four year cycle. And this one is going to end just like the last one when the price of oil spikes far enough to collapse the global economy and another market crash. The next economic downturn won't be a Great Recession, it will be a Great Depression.
At the moment the stock market is in a runaway move very similar to what unfolded out of the summer 2006 yearly cycle low. These runaway moves are characterized by uniform mild corrections all of similar magnitude and duration. For this particular rally the corrective size has been roughly 25-35 points. This could continue for weeks or months, but all runaway moves end in the same fashion, with a crash or semi crash that wipes out months of gains in a matter of days or even minutes.
Generally speaking, once a corrective move has run 20% beyond the normal correction size that is the signal that the move is over. Unfortunately, at that point you are usually already into the 'crash day'. This is why at some point one has to say enough is enough, and stand aside, or you risk getting caught in the crash.
When this runaway move comes to an end I'm pretty sure it will signal the beginning of the end for this cyclical bull market. That doesn't mean that we won't see a test or even a marginal break to new highs but I think we are clearly in the final phase of this liquidity driven rally that began in March of 2009.
We are now at the mercy of oil and the commodity markets. Bernanke's plan to print our way to prosperity is destined to failure. Ultimately he is just going to spike inflation and collapse the global economy, resulting in a worse downturn than what we saw in 2008/09.
Whether that breaking point is at $120 oil or $160 oil is anyone's guess.
Gone Fishin'
I will be out for the remainder of the week. Please check back Monday for our regularly scheduled program. Happy Trading--
2 Nisan 2012 Pazartesi
Monday Morning Musings
The market opened slightly lower this morning on the first day of the new quarter, but has since rallied back into positive territory.
Asian markets were mixed, while Europe is mostly higher this morning. We got a host of PMI manufacturing data from overseas, with some conflicting data out of China. The official government PMI reading rose to 53.1 from 51.0 last month. But the private PMI figure for China from HSBC fell to 48.3 from 49.6 previously. If I had to choose, I tend to side with the PMI figures since my gut says there is less smoothing going on there than the govt. figures.
In Europe, France posted its weakest PMI in 32 months (46.7) while the UK posted its strongest reading since May (52.1). But overall for the eurozone the PMI was only 47.7, which still indicates contraction for the region.
In the U.S., the ISM Manufacturing index rose to 53.4 in February from 52.4 the prior month, indicating still healthy growth for that sector.
In corporate news, Groupon (GRPN) shares are lower after reporting a revision to its Q4 results. Avon (AVP) shares are higher after reports that French beauty company Coty is submitting a bid to acquire Avon for a 21% premium to Friday's close.
The euro is lower this morning, but that is not hurting most commodities. Oil prices are higher near $103.50. Gold prices are also higher around $1682, and copper and silver prices are higher as well. The silver etf (SLV) is up nearly 3% so far today.
The 10-year yield is lower to around 2.17%; and the VIX is flattish near 15.40.
Trading comment: We often see this action in the beginning of a new quarter/month were funds get put to work, but I think the key action will be later this week when we see if there is any follow-through. If the indexes break to new highs that will obviously be a good sign, but if they are unable to and we see further distribution that could be a clue that we are due for a bigger pullback. I want to tread lightly at this juncture, especially as we approach Q1 earnings season.
Asian markets were mixed, while Europe is mostly higher this morning. We got a host of PMI manufacturing data from overseas, with some conflicting data out of China. The official government PMI reading rose to 53.1 from 51.0 last month. But the private PMI figure for China from HSBC fell to 48.3 from 49.6 previously. If I had to choose, I tend to side with the PMI figures since my gut says there is less smoothing going on there than the govt. figures.
In Europe, France posted its weakest PMI in 32 months (46.7) while the UK posted its strongest reading since May (52.1). But overall for the eurozone the PMI was only 47.7, which still indicates contraction for the region.
In the U.S., the ISM Manufacturing index rose to 53.4 in February from 52.4 the prior month, indicating still healthy growth for that sector.
In corporate news, Groupon (GRPN) shares are lower after reporting a revision to its Q4 results. Avon (AVP) shares are higher after reports that French beauty company Coty is submitting a bid to acquire Avon for a 21% premium to Friday's close.
The euro is lower this morning, but that is not hurting most commodities. Oil prices are higher near $103.50. Gold prices are also higher around $1682, and copper and silver prices are higher as well. The silver etf (SLV) is up nearly 3% so far today.
The 10-year yield is lower to around 2.17%; and the VIX is flattish near 15.40.
Trading comment: We often see this action in the beginning of a new quarter/month were funds get put to work, but I think the key action will be later this week when we see if there is any follow-through. If the indexes break to new highs that will obviously be a good sign, but if they are unable to and we see further distribution that could be a clue that we are due for a bigger pullback. I want to tread lightly at this juncture, especially as we approach Q1 earnings season.
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