by phil - April 21st, 2014 7:52 am
This has been the flow of Bloomberg's "Smart Money Flow Indicator" and, as Zero Hedge wonders: Just who is soaking up what the smart money is selling? Company Buybacks, Johnny 5 (tradebots) or the Greater-Fool Retail Investors?
What is clear is the institutional investors, the so-called "smart money" are dumping shares like there's a crash – only there isn't any apparent crash – the indexes are pretty much holding on fine, making their losses back on low-volume days while steadily selling off on higher-volume days, which needs to a massive net outflow of "smart money" replaced by a steady supply of "dumb money".
Of course, there's no money dumber than the Fed, who buy and buy and buy and buy and then, when it's hard to remember a time when they weren't buying – they buy some more.
Rather than show you the Fed's $4Tn balance sheet again – let's take a look at where the money went. Oh, there it is – right in the banks! The Fed has essentially borrowed money, on your behalf, and GIVEN it to their member banks at 0.25% interest (ie. FREE) who CLEARLY are not lending it out.
And why should they? They can simply turn around and buy TBills by leveraging their cash 10x (banks can do that) and collect 3% for 10 years X 10 = 30% while the Fed charges them 0.25% for a 29.75% annual profit on every dollar. Why then, should they lend it to you? Why should they offer you interest on your deposits when the Fed gives them all the money they want for free?
Banks USED to perform an important economic function that would save and protect your hard-earned money and your money was then lent out to other hard-working people so they could buy homes and cars and invest in businesses. Not any more, now banks only lend to Corporations and people with pristine credit (auto companies have to do their own lending), although they do let you buy things with Credit Cards that charge…
by Sabrient - April 20th, 2014 11:57 pm
Courtesy of Sabrient Systems and Gradient Analytics
As I suspected it might, the stock market bounced strongly last week. Weakness the prior week was due in part to traders exiting positions for vacation during the holiday-shortened week, protecting big capital gains, cashing out to pay taxes on capital gains, and “delta hedging” on put options. However, I’m not convinced that the pullback was sufficient to create the great buying opportunity — but it was sure a tradable bounce.
Among the ten U.S. business sectors, the big winner last week was Energy, which was up about +4.5%. Also, Financial and Industrial were each up about +3%. Defensive sector Utilities still stands alone as the year-to-date leader, up about +11%, while Energy’s strong performance last week has it in second place, up about +5% YTD. Healthcare has been the big loser as it has fallen from the penthouse to the outhouse since the beginning of March, led by the big selloff in momentum favorites from biotech and biopharma.
Wringing out some of the excesses has been healthy for the market overall. I expect that at this stage of the bull run, particularly with the Federal Reserve methodically tapering its liquidity injections, the higher-quality stocks with reasonable forward valuations that were sold off by the momentum traders will recover quickly while the lower-quality speculative stocks that surfed the wave of speculator euphoria will be left behind in a general flight to quality.
Many market commentators are warning of a similar “jobless recovery” as we saw in the 1990s. They lament the sky-high profit margins (that are likely to revert to the mean), growing income inequality, and the predominance of low-paying or part-time jobs among our anemic job growth. Moreover, most new investment and M&A in today’s high-tech society are in intellectual property or capital-intensive (rather than labor-intensive) business – whether new drilling technologies for the energy industry or Facebook’s $19 billion acquisition of WhatsApp (with all of 55 employees).
Thus, many are directing investors’ attention to emerging markets. The MSCI Emerging Markets Index is trading at a forward P/E of around 10.5x, compared with 15.5x for the S&P 500 — the biggest discount since 2006. Moreover, some of the key emerging market currencies appear severely undervalued, and there’s the potential for significant economic reforms following upcoming elections in many of the key emerging market countries.
by SWW - April 20th, 2014 12:39 am
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by ilene - April 18th, 2014 5:00 pm
Courtesy of Michael Snyder
If current trends continue, many of the most common food items that Americans buy will cost more than twice as much by the end of this decade. Global demand for food continues to rise steadily as crippling droughts ravage key agricultural regions all over the planet. You see, it isn't just the multi-year California drought that is affecting food prices. Down in Brazil (one of the leading exporters of food in the world), the drought has gotten so bad that 142 cities were rationing water at one point earlier this year. And outbreaks of disease are also having a significant impact on our food supply. A devastating pig virus that has never been seen in the U.S. before has already killed up to 6 million pigs.
Even if nothing else bad happens (and that is a very questionable assumption to make), our food prices are going to be moving aggressively upward for the foreseeable future. But what if something does happen? In recent years, global food reserves have dipped to extremely low levels, and a single major global event (war, pandemic, terror attack, planetary natural disaster, etc.) could create an unprecedented global food crisis very rapidly.
A professor at the W. P. Carey School of Business at Arizona State University named Timothy Richards has calculated what the drought in California is going to do to produce prices at our supermarkets in the near future. His projections are quite sobering…
- Avocados likely to go up 17 to 35 cents to as much as $1.60 each.
- Berries likely to rise 21 to 43 cents to as much as $3.46 per clamshell container.
- Broccoli likely to go up 20 to 40 cents to a possible $2.18 per pound.
- Grapes likely to rise 26 to 50 cents to a possible $2.93 per pound.
- Lettuce likely to rise 31 to 62 cents to as much as $2.44
by phil - April 17th, 2014 8:42 am
What a turnaround!
We knew Yellen's speech yesterday would boost the markets but – WOW! We didn't have to hear what she actually had to say, of course, the Futures popped the S&P up to 1,855 and we finished the day at 1,862, well over our strong bounce target for the week (see Monday's post for details).
Since the week is ending today, all they have to do is hold 1,850, along with Dow 16,240, Nas 4,150 (not there yet), NYSE 10,430 and Russell 1,145 (oops) and we're back in bullish business.
So, we have a couple of laggers – is that the end of the World? Maybe – and, since it's a holiday weekend, I think we're going to hold off on our BUYBUYBUYing until we get the all clear next week. Meanwhile, it's not like we're sitting on our hands. In our Live Member Chat Room we like to do earnings plays and yesterday we picked SNDK and went with the May $80 calls at $1.55 with SNDK at $76.19. Earnings were great and, pre-market, SNDK is heading for $81, which should give us at least a double for our day's work.
Even more recently, at 5:46am, I sent out a note to buy Silver Futures (/SI) at $19.51 and I just (7:46) put out another note to close it out at $19.70. Why take a 19-cent gain off the table? Because Silver Futures pay us $50 per penny, per contract so 19 cents is $950 per contract in two hours – that's good money!
I Tweeted out that trade as well so make sure you follow me HERE if you want to know about more trades like that or JOIN OUR LIVE MEMBER CHAT ROOM and never miss another opportunity, like the one I also posted this morning for Gasoline Futures (/RB)!
In yesterday's morning post, I called for shorting oil at the $104.75 line into inventories (10:30). Of course, I made that call at 8:11 am, so forgive me for missing by a dime but we hit our shorting target (with a spike almost to $105) and then got…