by ilene - May 26th, 2015 8:17 pm
Financial Markets and Economy
The dollar is going crazy right now (Business Insider)
Traders are piling in to the dollar after long weekends in both the US and the UK.
The dollar index rate, which measures the currency against most major peers, is up over 1% today.
Euro Tumbles to One-Month Low Against Dollar (Wall Street Journal)
The euro tumbled to a one-month low against the dollar as doubts over Greece’s ability to repay its debts intensified, while Greek bonds came under renewed pressure.
The common currency fell 0.9% to $1.0885, extending the previous day’s declines as markets fully reopened following the long holiday weekend.
Global Trade Dives Most since the Financial Crisis (Wolf Street)
How great was the global economy in the first quarter?
We know the US economy was crummy. The revised GDP estimate will likely sink into red mire. Hence the heated proposals these days, including at the Fed, to apply “a second round of seasonal adjustment” that would “correct” the first-quarter GDP estimate, no matter how bad, into positive territory. An elegant way of covering up an unsightly sore.
IMF: China's yuan currency is 'no longer undervalued' (Business Insider)
China's yuan currency, which Washington has long alleged was manipulated, is "no longer undervalued", the International Monetary Fund said Tuesday.
"Our assessment now is that the substantial real effective appreciation over the past year has brought the exchange rate to a level that is no longer undervalued," the IMF said in a statement after a consultation mission to China.
South Africa’s economy, the continent’s second-largest, grew at a slower pace in the first quarter as power outages curbed manufacturing output and farming output contracted.
Gross domestic product rose an annualized 1.3 percent from the previous quarter, when it expanded 4.1 percent, the statistics office said in a report released in Cape Town on Tuesday. The median
by Sabrient - May 26th, 2015 3:39 pm
Courtesy of Sabrient Systems and Gradient Analytics
Early last week, stocks broke out, with the S&P 500 setting a new high with blue skies overhead. But then the market basically flat-lined for the rest of the week as bulls just couldn’t gather the fuel and conviction to take prices higher. In fact, the technical picture now has turned a bit defensive, at least for the short term, thus joining what has been a neutral-to-defensive tilt to our fundamentals-based Outlook rankings.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.
Last Wednesday’s FOMC minutes confirmed investor expectations by indicating that economic data does not yet warrant a fed funds rate hike in June, and investors took this as a reason to finally break out above stubborn technical resistance. Both PMI manufacturing and the Philly Fed index came in with readings that show some growth, but below expectations. The 4-week average on jobless claims fell to 266,000, which is quite promising. Equities remain the favored asset class this year, particularly those playing catch-up, like China, Japan, Europe — and even emerging markets.
It now has been almost three years since the market pulled back at least 10%. Nevertheless, bulls are having a hard time gaining traction after this latest technical breakout (basically flat-lining after last Monday), and a test of conviction is sure to come. The psychological thresholds of Dow at 18,000, S&P 500 at 2100, NASDAQ at 5,000, and Russell 2000 at 1200 all must hold as support levels, or we are back to the market churn, searching for a new catalyst.
The CBOE Market Volatility Index (VIX), a.k.a. fear gauge, closed Friday at 12.13 and has held below the 15 fear threshold since a brief spike to that level back on May 6-7. In addition, the volatility of volatility (i.e., the VVIX) reached its lowest level since July 2014. In fact, ConvergEx points out that the expected volatility has fallen over the last month for a range of equities including U.S. small caps, emerging markets, and 8 of 10…
by ilene - May 26th, 2015 11:24 am
Financial Markets and Economy
Iraq is taking OPEC's strategy to defend its share of the global oil market to a new level.
The nation plans to boost crude exports by about 26 percent to a record 3.75 million barrels a day next month, according to shipping programs, signaling an escalation of OPEC strategy to undercut U.S. shale drillers in the current market rout. The additional Iraqi oil is equal to about 800,000 barrels a day, or more than comes from OPEC member Qatar. The rest of the Organization of Petroleum Exporting Countries is expected to rubber stamp its policy to maintain output levels at a meeting on June 5.
Through a quirk in state term limits combined with a terrible midterm election, the Nevada legislature has been taken over by amateurs and extremists. The legislature is now debating whether to dismantle the Nevada public employee pension system (PERS), a system that has gotten consistently high marks for transparency, responsibility and stewardship.
This attack on retirement benefits follows a very familiar pattern of fabricating data to destroy retirements that work and that people really like. It’s the same nonsense and lies used to destroy private pensions two decades ago, but this time it’s being done as part of a partisan wet dream of “limited government.” It’s a strategy as American as fast food and crumbling infrastructure.
After 17 months of civil war spanning a swathe of South Sudan bigger than Syria, President Salva Kiir’s survival may hinge on the fate of a single oil field.
Paloch in Upper Nile state, the only region still pumping crude in a nation with sub-Saharan Africa’s third-largest reserves, has re-emerged as the rebels’ prime target.
by phil - May 26th, 2015 7:31 am
Greece is back in the spotlight.
Talks broke down this morning and the Euro fell all the way to $1.088, a new low for the decade. The Dollar jumped to 97.235, up 4.5% in two weeks and back in the middle of its 6-month range. That, of course, is putting a bit of pressure on equities and commodities which are priced in Dollars and losing value relative to the currency they are priced in. In a low-volume, post-holiday week (London is still closed), we're not going to have much to go on, so this is more of a watch and wait kind of day.
Getting back to Greece, which is a very big deal that people have simply gotten tired of talking about. According to Greek Finance Minister, Varoufakis, there is a common fallacy pervades coverage by the world’s media of the negotiations between the Greek government and its creditors. The fallacy, exemplified in a recent commentary by Philip Stephens of the Financial Times, is that, “Athens is unable or unwilling – or both – to implement an economic reform program.” Once this fallacy is presented as fact, it is only natural that coverage highlights how our government is, in Stephens’s words, “squandering the trust and goodwill of its eurozone partners.”
The view that Greece has not achieved sufficient fiscal consolidation is not just false; it is patently absurd. The accompanying graph not only illustrates this; it also succinctly addresses the question of why Greece has not done as well as, say, Spain, Portugal, Ireland, or Cyprus in the years since the 2008 financial crisis. Relative to the rest of the countries on the eurozone periphery, Greece was subjected to at least twice the austerity. There is nothing more to it than that.
The problem, according to Varaufakis, is simple: Greece’s creditors insist on even greater austerity for this year and beyond – an approach that would impede recovery, obstruct growth, worsen the debt-deflationary cycle, and, in the end, erode Greeks’ willingness and ability to see through the reform agenda that the country so desperately needs. Our government cannot – and will not – accept a cure that has proven itself over five long years to be worse than the disease.
by ilene - May 25th, 2015 3:12 pm
Financial Markets and Economy
There’s no denying the effect that fees have on investments. While the difference between a fee of 0.5% and 0.25% looks tiny on paper, apply it to an index fund over a quarter-century or more of investing and let the effects of compounding work on it and you can easily see a worker winding up with tens of thousands of dollars less on account at retirement.
So it’s easy to see how and why the case protects workers and retirement savers.
The potential problems from the ruling are much harder to see, but they’re just beneath the surface now and likely to surface as the effects of the ruling play out.
7 Lies Investors Tell Themselves (Market Watch)
After six years of rising U.S. stock prices, investors are no doubt richer. But they may be thinking a little less clearly.
“In a bull market, there’s a tendency for investors to think they’re brilliant,” says Brad Barber, a finance professor at the University of California, Davis, and an expert in behavioral finance. Indeed, as share prices climb, investors’ confidence grows and they start making all kinds of dubious claims.
Here are seven comments you have probably heard from friends—and that may have escaped your own lips.
Here's your complete preview of this week's big economic events (Business Insider)
It's a short week in America as everyone takes Monday off to celebrate Memorial Day and enjoy some barbecue with their friends and family.
Surely, they'll also be
by ilene - May 24th, 2015 12:20 pm
If the S&P 500 does not have a 5% correction this year, it will be the first time in 20 years. And it's been 3.6 years since the last 10% correction. And trailing and forward PEs are relatively high. In the low interest rate environment, higher-than-normal stock prices are the new normal, but how much higher? And should we expect a reset with the Fed's plans to ease the interest rate higher?
Courtesy of Joshua M Brown
Deutsche Bank is out with a piece of research this weekend mentioning the fact that the S&P 500 has just broken a record high thanks to a median trailing PE ratio of over 18 – the highest we’ve seen since 2010. They note that this PE ratio is 12% above the long-term average going back to 1960. The forward PE of 17.3 times earnings expectations over the coming four quarters is 22% above the historical median. David Bianco attributes this, as almost all of us do, to the incredibly low yields on bonds and their effect on the equity risk premium.
More interestingly, Bianco includes an acknowledgement that it has now been 916 days since the last 10% correction for the index, or 3.6 years (last October’s Ebola /ISIS sell-off was 9-and-change percent intra-day). We’ve not had even a 5% correction so far in 2015 despite a spate of elevated volatility earlier in the year.
Here’s David Bianco and Ju Wang:
We believe the probability of a 5%+ dip is high this summer and our tactical call remains Down given the S&P now at an even higher PE than a year ago, heightened uncertainty in 10yr yields, weak earnings growth and continued soft economic data. We haven’t had a 5%+ dip this year. Historically 5%+ dips are common and happen at least once a year since 1960, except 1964, 1993 & 1995. It has been 916 trading days (3.6 years) since a 10% correction. Selloff triggers could be a further rise in 10yr yields especially if UE keeps falling amidst slow economic growth and Fed remains unclear on first hike timing, or a jump in the dollar upon the Fed expressing firm intentions to hike in Sept.
S&P hits record high on 18 trailing PE, PE will be sensitive to Treasury yields
Deutsche Bank – May 22nd, 2015
Picture by Geralt at Pixabay.