News You Can Use From Phil’s Stock World

Financial Markets and Economy

Bank of America: Markets Are in a 'Twilight Zone' and It's Time to Hold More Cash and Gold (Bloomberg)

In a note sent out this morning, Bank of America Merrill Lynch has a warning for investors: 

Investors remain trapped in “The Twilight Zone”, the transition period between the end of QE and the first rate hike by the Fed, the start of policy normalization…until (a) the US economy is unambiguously robust enough to allow the Fed to hike and (b) the Fed’s exit from zero rates is seen not to cause either a market or macro shock (as it infamously did in 1936-7), the investment backdrop will likely continue to be cursed by mediocre returns, volatile trading rotation, correlation breakdowns and flash crashes. For this reason we continue to advocate higher than normal levels of cash, adding gold and owning volatility in mid 2015. Given extremities of liquidity, profits, technological disruption, regulation, income inequality…potential for a cleansing drop in asset prices cannot be dismissed. Most likely catalysts: Consumer, Rates, A-shares, Speculation, High Yield.

Here's your complete preview of this week's big economic events (Business Insider)

Stocks are back at all-time highs. 

After spending about a month trading just off record levels, the S&P 500 powered back to an all-time high on Thursday and fractionally improved on this to end the week, closing at 2,122.73 on Friday. 

Bank of America: Markets Are in a 'Twilight Zone' and It's Time to Hold More Cash and Gold (Bloomberg)

Investors remain trapped in “The Twilight Zone”, the transition period between the end of QE and the first rate hike by the Fed, the start of policy normalization…until (a) the US economy is unambiguously robust enough to allow the Fed to hike and (b) the Fed’s exit from zero rates is seen not to cause either a market or macro shock (as it infamously did in 1936-7), the investment backdrop will likely continue to be cursed by mediocre returns, volatile trading rotation, correlation breakdowns and flash crashes. For this reason we continue to advocate higher than normal levels of cash, adding gold and owning volatility in mid 2015. Given extremities of liquidity, profits, technological disruption, regulation, income inequality…potential for a cleansing drop in asset prices cannot be dismissed. Most likely catalysts: Consumer, Rates, A-shares, Speculation, High Yield.

Japanese machinery orders rebound 2.9% (FT)

Japanese businesses were spending a bit more than expected in March, but downward revisions to February weigh on the optimism.

Core machinery orders in Japan — a proxy for private capital expenditures — rebounded 2.9 per cent in March, the first gain of 2015. Forecasts looked for a 1.5 per cent increase.

How Much Should a Currency Be Worth? No One Really Knows (Wall Street Journal)

Legislation that targets currency manipulation might make or break U.S. PresidentBarack Obama’s signature Pacific trade deal. But calling out offenders for currency transgressions is far from a clear-cut exercise.

Wake-Up Call For B-Dud And The New York Fed Staff—-This Isn’t “Transitory” (Wall Street Examiner)

New York Fed staff economists said in a new report growth should regain some of its swagger after stumbling during a chilly first quarter…… it believes first-quarter weakness was partly due to “transitory factors,” particularly harsh winter weather and labor disputes in West Coast ports: “Consequently, the staff forecast anticipates that growth will rebound to around 2.5% annual rate over the remainder of 2015 and 2016…..”

Outlook brighter, but not enough yet for higher rates (Reuters)

Prospects for a step-change in global economic growth are better than they have been in many years, but much depends on solid evidence that an awful first quarter for the United States is far in the rear-view mirror.

With Wall Street's benchmark stock index near a record high and bond yields on the rise, the coming week is packed with important global data releases and policy minutes from three major central banks, including the U.S. Federal Reserve.

Brazil’s Real Falls as U.S. Rate Outlook Damps Emerging Markets (Bloomberg)

Brazil’s real dropped for a second straight day as speculation that the Federal Reserve will raise interest rates later this year damped demand for higher-yielding assets from emerging markets.

How Japan Became The Benchmark For America's Fraudulent "Jobs Recovery" (Zero Hedge)

It was one month ago when we showed how, thanks to a lot of statistical sleight of hand, Japan had completely "revised" one year of increasing nominal base wages to declining or flat at best, confirming that all the much-touted wage "improvements" heading into the Japanese election of late 2014 in which Abe was reelected by a wide margin had been purposefully fabricated to give the impression that Abenomics is working, when in reality it was… well, see the pre- and post-revision data for yourselves.

Chile’s Economy Grows More Than Forecast as Demand Picks Up (Bloomberg)

Chile´s economy grew at the fastest pace in one year in the first quarter, beating analysts’ expectations, as domestic demand rose for the first time since 2013. Investment declined for the seventh consecutive quarter.

The Stock Market Is The Economy, So… (Wall Street Examiner)

The Fed’s Industrial Production (IP) Index slowed dramatically in April. It weakened enough to decisively break the uptrend in force since 2011, when the trend growth rate slowed from the bungee rebound of 2010.

Stocks and Trading

Mauboussin Talks Calibration, Conviction, And Overconfidence (Value Walk)

When stock pickers talk about their investment process they usually describe the nuts and bolts like how they generate ideas or value assets, but having the self-awareness to know which ideas are solid and which are still shaky is at least as important – what fund manager types call conviction. The problem is that most people are overly confidentin their own ability, relying on their intelligence when it’s rationality that will keep them out of trouble.

U.S. Stocks Close Higher; S&P 500 Sets Record (Wall Street Journal)

The S&P 500 index eked out another record, capping a quiet week of trading.

Even as money continues to flow into U.S. stocks, traders said there is little enthusiasm among investors about buying shares. The market has struggled to move higher in recent months, instead staying in a fairly tight range. And when records have been set, it has often been followed soon after by a retreat in the broad market.

U.S. Stocks Fluctuate Amid Corporate Deals as Dollar Advances (Bloomberg)

U.S. stocks fluctuated, with the Standard & Poor’s 500 Index near a record, as corporate deals offset a stronger dollar and as Treasury yields rose the most in a week.

Politics

North Korea 'not even close' to talks with U.S. due to nuclear program: Kerry (Reuters)

U.S. Secretary of State John Kerry said on Monday North Korea has "not even come close" to taking the steps needed to rein in its nuclear weapons program to initiate talks, adding the United States was considering further sanctions.

Speaking in the South Korean capital, Kerry said Washington continued to offer the isolated North the chance for an improved relationship in return for signs of a genuine willingness to end its nuclear program.

Egypt's ex-president Mohamed Morsi sentenced to death (Aljazeera)

An Egypt court has sentenced former President Mohamed Morsi to death for a mass prison break in 2011, prompting immediate condemnations from Amnesty International and the Turkish president.

The court ruled on Saturday that the sentencing of Morsi and 105 others will be referred to the grand mufti, the highest religious authority in Egypt, for confirmation.

Many of those sentenced were tried in absentia.

The court will pronounce its final decision on June 2.

Source: John Kasich 'very likely' to run in 2016 (CNN)

A source close to John Kasich said Sunday that the Ohio governor is "very likely" to run for president, but cautioned there would be nothing definitive for at least a few weeks.

In late April, Kasich made a round of appearances in Washington including at the New America Foundation's annual conference where he told CNN, "If I can win, I'm likely to run."

Saudi Coalition Jets Resume Airstrikes Against Yemen Rebels (Bloomberg)

A Saudi-led military coalition resumed airstrikes in Yemen targeting Shiite Houthi rebels after a five-day humanitarian cease-fire ended.

Warplanes carried out strikes against Houthi militia and fighters loyal to former President Ali Abdullah Saleh, who has allied with the rebels, in the southern port city of Aden. Nabil Mohammed, an Aden resident, said by phone that bombs hit areas including al-Tawahi district that was recently seized by the rebels.

Technology

A Russian Smartphone Has to Overcome Rivals and Jokes About Its Origin (NY Times)

Few people looking to buy a trendy, state-of-the-art smartphone anywhere in the world today would even think about a Russian model, but the makers of the YotaPhone aspire to change that.

The start-up’s quest to break into the cutthroat global market for cellphones even got a boost from President Vladimir V. Putin, who has lately renewed a push to make innovation the next big thing for Russia’s bedraggled economy.

LG’s G4 Flagship Smartphone Begins To Go On Sale Worldwide (Tech Crunch)

LG revealed the G4, its newest flagship device, in April, and now the 5.5-inch screen device isrolling out for sale across the world.

Already on sale in its native Korea first, of course, the G4 will land in Hong Kong, before coming to Turkey, Russia and Singapore. Thereafter, LG said the phone will hit “most of Europe, North America, CIS, Southeast Asia, Middle East/Africa and South/Central America” over the next month — although it didn’t provide more specific timing for those releases.

Health and Life Sciences

This Food Change Up Could Save Seven Thousand Lives A Year (Think Progress)

Trans fats may soon be a thing of the past with a ruling by the Obama Administration that would require U.S. food manufacturers to dramatically cut back on a substance that nutritionists have long designated as unhealthy and potentially deadly.

The ruling, expected as early as next week, follows a 2013 announcement by the Food and Drug Administration (FDA) that trans fats, also known as partially hydrogenated oils, posed significant health risks, namely an increase in levels of bad cholesterol. Shortly after, the U.S. Department of Agriculture removed trans fats from its “generally recognized as safe” category of foods.

Rare Species Of Seaweed Could Extend Your Life By Decades (Total Life Guru)

These days humans are living longer than ever. Our ancestors often died from illnesses such as polio, rubella, cholera and tuberculosis. Today all of these are rare and, if contracted by an individual, easily curable.

Many modern deaths are not caused by viruses or bacteria, but instead the effects of human lifestyle choices. Chillingly referred to in medical circles as ‘the silent killer’, one of the most prolific of these is high blood pressure – which often leads to illnesses that cut short a person’s life by 10, 20 or even 30 years.

Life on the Home Planet

9 Bikers Dead From Shootout in Waco, Texas (NY Times)

A shootout among members of several rival motorcycle gangs in a busy shopping plaza in the Central Texas city of Waco on Sunday left at least nine bikers dead and 18 others injured, creating chaos in a sprawling parking lot packed with afternoon shoppers, law enforcement officials said.

The gunfire erupted about 12:15 p.m. outside a Twin Peaks Restaurant, where members of the motorcycle clubs had gathered. The fight spilled into the parking lot, initially involving just fists and feet, but escalating quickly to chains, knives, clubs and firearms. Waco police officers were already at the scene when the confrontation unfolded because they had anticipated problems as hundreds of bikers from at least five groups gathered at the shopping plaza.

The Conservative Case for Taxing Carbon Pollution (Mother Jones)

Conservative climate champions are often laughed off or ignored. But what's happening within the American political right could change everything, and fast.

Each year since 1989, the JFK Library bestows its Profile in Courage award to a public servant who takes a principled but unpopular position. This year, the award went to Bob Inglis, a former congressman from South Carolina who's turned into America's best hope for near-term climate action. Oh, he's also a Republican.