by ilene - July 26th, 2015 9:59 am
Courtesy of Marc To Market
Surveys suggest that a little more than 80% of the economists expect the Federal Reserve to hike rates in September. The September Fed funds futures, the most direct market instrument, has only about a 50% chance discounted. This week's FOMC meeting is the last one before September. The economy is performing largely in line with the Fed's expectations. Investors may be looking in vain if they expect some hint from the FOMC that it will in fact hike rates in September. It is more reasonable to expect a non-committal statement on the timing of the liftoff, as Yellen was in her recent Congressional testimony.
The Fed diligently worked to shift the focus of the outlook of policy from a date-specific commitment to a data-dependent path. A signal of a September rate hike would bring investors back to thinking about the date and unwind the Fed's efforts. This is unlikely. There are still much economic data to be released, including two employment reports. Also in the coming weeks, there will be a greater sense of the economic performance for the first couple of months of Q3.
The day after the FOMC meets, the US will publish its first estimate of Q2 GDP. The Atlanta Fed says it is tracking about a 2.4% annualized pace. We suspect the risk is on the upside. Economists may take advantage of the June durable goods orders report to tweak their forecast.
We know that Boeing orders jumped to 161 in June from 11 in May. This bodes well for headline orders, which may rise 3.2%-3.5% after a 1.8% decline in May. The details, especially the orders and shipments for nondefense and non-aircraft durable goods, should point improving business investment, and better overall growth.
Annual benchmark GDP revisions will also be announced. With new seasonal adjustments, the biggest impact is likely not to be so much on growth itself, but how it is distributed between the quarters. There is some risk that the first quarter may be revised up, but this may…
by phil - July 25th, 2015 7:23 am
How would you like to make $7,175 in 4 days?
That's the kind of money that gets even rich people's attention and it also happens to be how much money you would have made trading just ONE CONTRACT on each of our 3 Futures hedges from Tuesday Morning's post. This wasn't some "secret" play, either – this was a public call to short the Futures (along with my explanation as to why you should) that was published at www.philstockworld.com, www.seekingalpha.com and was tweeted out and put up on our Facebook Page - all before the markets opened on Tuesday.
Most traders are TERRIFIED of the Futures market but it's really not much different than the options market with the great exception being that it's open almost 24 hours a day. That's what we LOVE about trading the futures – if we hear news that's going to move the market when it opens, we don't have to wait to make a trade that can profit from it. In the case of these Futures shorts, we initiated those trades in our Live Chat Room at 5:50 am, where I said to our Members:
Dow having a particularly rough time with IBM dragging it down. 18,000 on /YM is still our shorting line there and 2,120 on /ES and 4,675 on /NQ and 1,270 on /TF is long gone (1,258) but below 1,260 is a good signal that shorts still work. IBM is in transition mode and I still like them and they are missing from the LTP so I'll be looking for a play once the dust settles.
We KNEW, for a FACT, that IBM had disappointing earnings (which we considered a buying opportunity) that would drag the Dow lower (because IBM is a key, price-weighted component) and Futures trading allowed us to take advantage by shorting the Dow Futures (/YM) at 18,000 before the market opened. As it turned out, the 18,000 line did hold up into the open (see our premise on manipulated openings from the same day's post) and everyone got a chance to join us in our Futures…
by ilene - July 24th, 2015 9:20 pm
Courtesy of Valuewalk
Don’t tell Jim Grant, the publisher of Grant’s Interest Rate Observer, that gold is a hedge.
The author and publisher said the metal is much more dynamic; providing a trifecta of price, value and sentiment, and investors should have exposure to it.
“[G]old is an investment in monetary and financial disorder – not a hedge. You look around the world and you see exchange rates are properly disorderly, when you look around the world of lending and borrowing — we are in a regime of price control by another name, so-called zero percent rates and quantitative easing by the world central banks – we are in one of the most radical periods of monetary experimentation in the annals of money,” Grant told Kitco News Thursday.
Grant added that it could be that it all works out, albeit a very “low probability.”
“You want to have exposure to the reciprocal asset of the paper assets that are the most popular – so gold, to me, is now the conjunction of price, value and sentiment, and I am very bullish indeed.”
Gold prices are on track for its longest run of losses since 1996. After reaching five-year lows this week, the metal was relatively quieter on Thursday with prices slightly rebounding on some bargain hunting in the spot market. Kitco’s spot gold was last up $0.60 at $1094.60 an ounce.
Grant summed up the gold selloff as “Mr. Market having a sale,” and added that the downward spiral is “terrifically vexing but a wonderful opportunity.”
He explained that no one knows the bottom for the metal and that should not be the sole focus.
“The important thing to recall is why those of us who own it, bought it. What is it about gold that ought to make it appealing – when it seems to be absolutely the thing you don’t want to have.” He added that gold thrives in the face of monetary turmoil, disorder and uncertainty, noting, “I think we have all three of these things.”
by ilene - July 24th, 2015 4:25 pm
Courtesy of Lance Roberts via STA Wealth Management
Is it just me? Last week while on vacation, the markets surged back to all-time highs as the Greek and China problems were solved. Unfortunately, as I left the white, sandy beaches and clear ocean waters behind me to return to reality – so did the markets. Either it is purely coincidental or I should head back to Mexico.
As I discussed earlier this week (chart updated through Thursday's close):
"While the prices did manage to break out of the downtrend that has contained the market since mid-May, so far that rally has failed to attain new highs. Furthermore, the previous oversold condition that acted as the "fuel" for the recent rally has been exhausted with the markets are now back to an extreme overbought condition. This suggests that there is likely very little upside currently and that investors should consider using this opportunity to engage in prudent portfolio management practices such as taking profits, reducing laggards, and rebalancing allocations."
That advice has played out well as the markets have continued to deteriorate, along with a vast majority of internal measures. The question is now, and is the subject of this weekend's reading list, is the correction over? Or, is this just the beginning of something bigger?
1) The Thinnest New High In Stock Market History? by Dana Lyons via Dana Lyons' Tumbler
"When we posted yesterday's piece on the stock market's weak internals (If Beauty's On The Inside, This Market Wins The Ugly Contest), we weren't sure if things could get any worse – and by how much – with the major averages still able to hold near 52-week highs. Well, the answers were 'yes' and 'a lot'."
Read Also: What Do 1987, 2003, 2009 And 2015 Have In Common by Chris Ciovacco via Ciovacco Capital
2) Doubling Down On A Summer Correction by Michael Gayed via MarketWatch
"This is not about opinion, and this is not a call. The odds simply favor some kind of heightened volatility, and volatility tends to coincide with corrections in stocks. Much like in July 2011 when stocks rallied and all seemed well
by phil - July 24th, 2015 8:32 am
I know, it's boring!
Who wants to keep talking about stuff like China's PMI just posted CONTRACTION for the 2nd month in a row DESPITE the MASSIVE stimulus? What we liked hearing were the ESTIMATES by ECONOMORONS, who said it would improve to 49.7. As it turned out, up 0.3 turned out to be down 1.2 so our leading economorons missed this one by 500% but hey – we rallied into it!
Don't worry, we're still one more dip away from breaking into the 2008/9 low range – at the moment, we're still holding on to the lows since 2011 but, unfortunately, China may have been too distracted propping up the markets to prop up the actual manufacturing sector. That's one of the reasons commodities are collapsing – nothing is being manufactured on the World's factory floor.
“The industrial sector has seen no sign of stabilization yet,” said Xu Gao, chief economist at Everbright Securities Co. in Beijing, adding that most of the growth stabilization last quarter came from the services sector. “The government should further step up the policy supports, including further boosting infrastructure investment and expediting the debt swap program.”
ROFL! This is how our Global economy "works" people. It's not up to the Capitalists to make things people actually want to buy – it's the Government's problem to make them profitable, no matter how much time and money is being wasted!
Ray Dialo, of Bridgewater (the World's biggest hedge fund) has taken my advice and is now warning people out of China (a bit late but he finally came around).
“Our views about China have changed,” Bridgewater’s billionaire founder, Raymond Dalio,wrote with colleagues in a note sent to clients earlier this week. “There are now no safe places to invest.”
Of course Ray, with "only" $169Bn under management, isn't really the World's largest hedge fund anymore. That honor now goes to Apple's (AAPL) super-secret Braeburn Capital, whose sole purpose is to manage their own $203Bn cash hoard.
by ilene - July 23rd, 2015 11:15 pm
Courtesy of John Mauldin
In today’s Outside the Box, my good friend Lacy Hunt of Hoisington Investment Management reminds us that since the 1990-91 recession, the 30-year Treasury bond yield has dropped from 9% to 3%, a downward move nearly identical to the decline in the rate of inflation, which fell from just over 6% in 1990 to 0% today. Therefore, Lacy says, “(I)t was the backdrop of shifting inflationary circumstances that once again determined the trend in long-term Treasury bond yields.”
During that 25-year period, though, there have been nine significant backups, when yields rose an average of 127 basis points, despite weakening inflation. Lacy attributes these periods to an “intermittent change in psychology … a strong sentiment that the rise marked the end of the bull market, and a major trend reversal was taking place.”
It’s happening again today, Lacy asserts; and he ticks off four misperceptions that have pushed Treasury bond yields to levels that represent significant value for long-term investors. They are:
- The recent downturn in economic activity will give way to improving conditions and even higher bond yields.
- Intensifying cost pressures will lead to higher inflation/yields.
- The inevitable normalization of the Federal Funds rate will work its way up along the yield curve causing long rates to rise.
- The bond market is in a bubble, and like all manias, it will eventually burst.
Lacy builds a strong case that fundamental economic forces are exerting downward, rather than upward, pressure on inflation. It’s a contrarian view – certainly not mainstream at this moment – but considering that Lacy has been right for well over 30 years, consistently pointing out through the nine periods when everybody was proclaiming the end of the bond bull market that the fundamentals were still pointing in the direction of lower interest rates.
I’ve had some late-night discussions with Lacy trying to figure out what would make him a bond market bear, and we have discussed what it would take for rates to truly rise long-term. I look around, and right now I don’t see…