by clarisezoleta - October 23rd, 2016 11:10 am
Financial Markets and Economy
Saudi Arabian stocks led gains across most Gulf equities, rising for a third day on optimism the kingdom will repay companies after it raised a record $17.5 billion from its debut international bond sale.
If you’re a bank, the idea sounds crazy. Why pay someone to hold your cash?
In 1983, when Frederic Mishkin started writing "The Economics of Money, Banking and Financial Markets," his seminal textbook on macroeconomics, he never thought he'd devote much space to the idea of negative interest rates.
When the Bank of England cut interest rates to a new record low and unleashed a substantial package of quantitative easing on August 4, the bank said that the majority of its Monetary Policy Committee expected to "support a further cut in Bank Rate to its effective lower bound."
Why sterling's collapse is not good for the UK economy (The Guardian)
The most dramatic economic effect of the UK’s Brexit vote has been the collapse of sterling. Since June, the pound has fallen by 16% against a basket of currencies. Mervyn King, the previous governor of the Bank of England, hailed the lower exchange rate as a “welcome change”. Indeed, with Britain’s current-account deficit running above 7% of GDP – by far the largest since data started being collected in 1955 – depreciation could be regarded as a boon. But is it?
Think “hockey stick growth” is impossible because your company isn’t a high-tech start-up? Think again, says the author of a new book on navigating high-growth success.
The Nordic region’s only euro member is still struggling with austerity.
After being stripped of its top AAA credit grade at all three major ratings companies,
by Market Shadows - October 23rd, 2016 12:31 am
Financial Markets and Economy
A total $600 billion in share repurchases and $400 billion in dividends will be doled out by S&P 500 Index members by the end of the year, the biggest combined payout in history, according to strategists at Barclays Plc. Gravy like that is getting tougher to sustain as corporate profits suffer a six-quarter slump and cash levels begin to dwindle.
Deutsche Bank Could Be The “Lehman Moment” Of 2016 (Value Walk)
There is a ticking time bomb in the heart of Europe. Deutsche Bank, the largest bank in Europe, needs to be recapitalized. But neither the German government nor the European Central Bank (ECB) wants to fund it. This is leading to an unsafe and unstable situation. It could even trigger another global financial crisis.
San Francisco Federal Reserve Bank President John Williams on Friday redoubled his call for raising rates soon, telling reporters after a speech here that "this year would be good" for a rate rise that he had wanted to take effect last month.
One of the smartest maneuvers I've seen in business comes in the form of two somewhat simultaneous decisions made by Warren Buffett.
As the countdown to the European Central Bank’s December policy meeting begins, bond traders betting on an extension of the institution’s asset-purchase program get a chance to load up on more euro-zone government debt next week.
Personal finance expert Martin Lewis told 5 live Daily’s Adrian Chiles that financial education “is crucially important for educating our young people on how to live in this modern, competitive economy”.
And added that "It is unclear what happens to
by Market Shadows - October 22nd, 2016 6:22 pm
Morning Reads: McCain Tells Trump to Respect Democratic Process; Hurricane Matthew Was 6th Thousand-Year Storm in 1 Year
This post first appeared on BillMoyers.com.
Doubling down --> Donald Trump says he will accept the result of the election… if he wins it.
The GOP is largely silent on their candidate's unprecedented anti-democratic stance — with a few exceptions. John McCain (R-AZ), for instance, is speaking out. “I don’t know who’s going to win the presidential election. I do know that in every previous election, the loser congratulates the winner and calls them, ‘my president,’” he said in a statement. “This election must not be any different… I didn’t like the outcome of the 2008 election. But I had a duty to concede, and I did so without reluctance. A concession isn’t just an exercise in graciousness.”
No détente this year --> The Alfred E. Smith Memorial Foundation Dinner is an annual tradition at which the candidates, late in the campaign, get together and force joviality, "roasting" each other for the comedic benefit of rich and powerful New Yorkers. Trump didn't play by the rules last night, however; faced with jeers from the audience, he lost his cool. The New York Times reports: "Breaking with decades of tradition at the gathering once he took the microphone, Mr. Trump set off on a blistering, grievance-filled performance that translated poorly to the staid setting, stunning many of the well-heeled guests who had filed into the Waldorf Astoria hotel."
Hedge fund mogul comes in first --> With gifts to Hillary Clinton super PACs totaling $21 million, S. Donald Sussman looks likely to finish this election at the very top of Clinton's donor list. In an interview with The Washington Post's Matea Gold, he said he saw an irony in his donations. “It’s very odd to be giving millions when your objective is to actually get the money out of politics,” he said. “I am a very strong supporter of publicly financed campaigns, and I think the only way to accomplish that is to get someone like Secretary Clinton, who is committed to cleaning up the unfortunate disaster created by the activist court in Citizens United.”
One in a thousand --> Hurricane Matthew dumped a quantity of…
by phil - October 22nd, 2016 8:22 am
Who says we're not bullish?
While we are, certainly, cautious on the market and well-hedged (just in case), we certainly do seem to find a lot of bullish positions to take. That's because we're VALUE INVESTORS and there is almost always something of value to buy in any kind of market and our Top Trades are, of course, our top value picks – the ones we feel most confident in.
In our first year, our Top Trade Ideas had an astounding 81.1% winning percentage with 86 out of 106 trades making money within a few months. That's without even adjusting them. We do not have a portfolio for Top Trades, we just do these reviews but many of our Top Trade Ideas do end up in one of our 4 Member Portfolios.
Our August review took us through July 12th and July 12th was the last Top Trade Idea we had until August because I REALLY didn't trust the market in mid-July so this month, we'll just be reviewing our August trades as we like to give Sept time to cook before reviewing those. We had a surprising amount of trade ideas in August though. Our 15 May, June and July picks had 11 winners but, unfortunately, that actually bought down our percentage!
Of course, when you are reading our reviews, those losing trades are often still opportunities. CMG, CBI, PSO and SDS are all plays we still like from the last review – they are simply late bloomers! SDS, in fact, is a hedge – it's not supposed to win if the others are doing well but we still count it as a loss.
Top Trade Alerts come from our Live Member Chat Room at Philstockworld and represent a very small portion of our trade ideas but they are a fair representation of applying our "Be the House – NOT the Gambler" strategy and you can learn a lot by reviewing the performance of these trades through up and down markets over the course of a year. All PSW Basic and Premium Members have Top Trade Access (just make sure your smart phone number is in the box here if you want text alerts in addition to our EMail alerts).
by ilene - October 22nd, 2016 1:22 am
Summary: Throughout 2013, 2014 and early 2015, fund managers were heavily overweight equities and underweight cash and bonds. Those allocations have entirely flipped in 2016, with investors persistently shunning equities in exchange for holding cash.
Global equities are more than 15% higher than in February. A tailwind for this rally has been the bearish positioning of investors, with fund managers' cash in October rising to the highest level since 2001. Similarly, their equity allocations are now like those in February, mid-2010 and mid-2012, periods which were notable lows for equity prices during this bull market. Overall, fund managers' defensive positioning supports higher equity prices in the month(s) ahead.
Allocations to US equities had been near 8-year lows over the past year and half, during which the US outperformed most of the world. After rising for two months during the summer, allocations fell again to underweight in both September and October. Bearish sentiment remains a tailwind for US equities.
European equity markets, which had been the consensus overweight and also the world's worst performing region, are now underweighted relative to their long term mean. Investors are chasing the world's best performing region – emerging markets – which now have their highest overweight in 3 1/2 years. Emerging markets may rise further but note that the contrarian long trade is now over.
Among the various ways of measuring investor sentiment, the BAML survey of global fund managers is one of the better ones as the results reflect how managers are allocated in various asset classes. These managers oversee a combined $600b in assets.
The data should be viewed mostly from a contrarian perspective; that is, when equities fall in price, allocations to cash go higher and allocations to equities go lower as investors become bearish, setting up a buy signal. When prices rise, the opposite occurs, setting up a sell signal. We did a recap of this pattern in December 2014 (post).
Cash: Fund managers' cash levels at the equity low in February were
by ilene - October 21st, 2016 7:15 pm
Courtesy of Dana Lyons
A popular pharmaceutical ETF is testing its (ill-fated?) post-2009 bull market trendline.
As the major stock averages continue to bide their time in sideways fashion, one of the weaker sectors in the market continues to look sick. We have covered the relative laggard health care sector plenty over the past few weeks. The focus in many of the posts has centered around the various indices’ tests of their post-2008-2009 bull market Up trendlines. Some tests have been successful (e.g., biotech index, BTK…for now) while some have failed (e.g., pharmaceutical index, DRG). Today’s Chart Of The Day adds another example of such a test from the health care sector. This time, it is a fund, the SPDR S&P Pharmaceuticals ETF, ticker, XPH.
Like its pharma index sister, the DRG, the XPH is testing its post-2009 Up trendline (on a log scale). That said, while the DRG had held its steeper trendline connecting the 2009, 2011 and early 2016 lows until breaking it last week, the XPH (on an unadjusted basis) broke its similar trendline last year. However, we see a new, shallower trendline connecting the 2009 lows and the March 2016 lows serving as support over the past 6 months. Tests of this line in May and June resulted in bounces in the XPH. A few months later, we see the XPH testing this line once again.
In a weakish tape today, we saw the XPH pop nearly 1%. Thus, the line continues to provide support. However, like a sick patient, a dose of medicine may provide a temporary jolt, but if the symptoms persist, a full recovery may remain elusive. As such, despite the temporary bounces, this chart still looks sick.
As we have mentioned often, the more frequent that trendline tests occur, the more likely, in our experience, the trendline is to break. The troubling thing is that with 4 touches of the trendline in 7 months, the symptoms seem to persist. That is, the XPH has been unable to create any meaningful…
by Market Shadows - October 21st, 2016 8:58 am
Financial Markets and Economy
Gold’s best run since 2010 pushed Canadian equities to the top spot among developed-market stocks this year. Fifty dollar crude will give them an opportunity to stay there.
Would Cutting Corporate Tax Rates Really Grow the Economy? (The Atlantic)
One of the things Hillary Clinton and Donald Trump disagree most strongly about is how to stimulate the economy. Donald Trump has one idea that conservative economists would probably agree with: He wants lower taxes.
UBS Group AG, the world’s third-biggest currency trader, said it processed a record number of currency trades during the minutes of the pound’s flash crash this month.
India’s rupee headed for a third weekly decline, the longest stretch of losses since May, amid signs demand for the nation’s assets is waning.
Wall Street's China Wake-Up Call (Bloomberg)
Frustrated with its Chinese partner, JP Morgan is in talks to sell its stake in their investment banking venture, just days after it emerged that Goldman Sachs's Beijing-based Asia Pacific chairman, Mark Schwartz, is retiring from the firm.
Hedge funds' dismal performance might be a warning sign to the greater economy.
Several hedge funds have blamed their poor performance on central bankers, whose low interest rates, in the funds' view, are distorting markets.
It has been a bruising year for hedge funds. Big bets have been disastrous, investors have voiced discontent and some managers have been forced to rewrite their playbooks or call it quits.
Oil prices could hit $90 sooner than you think (OilPrice.com)
In the oil business, modish pundits are now pronouncing, “60 is the new 90,” championing the thesis that productivity
by phil - October 21st, 2016 8:32 am
Don't you just love oil trading?
After making $4,000 in less than a day on our Live Trading Webinar Idea on Wednesday (replay available here) we took advantage of the last day's trading the November contracts over at the NYMEX to short Oil Futures (/CL) one final time. As I said to our readers in yesterday's morning post:
Today is rollover day to the December contracts so anything can happen though, of course, we'll short below $51 or $51.50 if we get there on a bounce, using those lines as stops and, of course, we still have our longer-term Oil ETF (USO) puts. We can only hope that, by making contract spoofing more expensive for the pumpers, we can do just a little to curb the practice at the NYMEX – God only knows the GOP Congress has done nothing to stop this madness, which robs Americans of Billions of Dollars at the pumps each year.
Remember, I can only tell you what is going to happen in the markets and how to make money by trading it – the rest is up to you!
Another trade we left up to you was our call to short the S&P (also from our Webinar) Futures (/ES) at 2,140 and those gives us a nice ride down to 2,130, which was also good for $500 per contract and that's nice money to take home into the weekend so we're not being greedy if it stops us out (over our weak bounce line at 2,134 – also see yesterday's post), though we will short oil again as it struggles to take back $51 this morning though, now we're early in the December contract cycle, so there's less downward pressure, so it's a much riskier bet (so very tight stops above).
Also, in favor of the oil bull, OPEC is having another meeting this weekend (as noted in our Webinar, they are now having streams of meetings to talk up the price of oil) and Now Russia's Oil Minister is saying that, with Russian output now over 11Mb/d (a post-Soviet record), they are still willing to discuss production cutbacks. As…