David Rosenberg provided a nice list of risk in this morning’s client letter. The one major risk that Rosenberg and the market is largely overlooking at this juncture is the housing double dip. This has the potential to be THE most important story of 2011. As I’ve previously explained, declining asset values are highly destructive during a balance sheet recession. If the housing double dip surprises to the downside the problems that we’ve swept under the rug will quickly reemerge and this time there won’t be any political will for government intervention.
I still believe we are mired in a balance sheet recession that will result in below trend growth, deflationary risks and leaves us extremely vulnerable to exogenous risks that could exacerbate the current malaise. Rosenberg’s excellent list follows:
1. China is getting more active in its policy tightening moves as inflation pressures intensify. It’s not just food but wages too. Headline inflation, at 4.4%, is at a 25-month high. The People’s Bank of China (PBOC) just hiked banking sector reserve ratios by 50 basis points to 18.5% — the second such increase in the past two weeks and the fifth for the year. This could well keep commodity prices under wraps over the near-term.
2. European debt concerns will not be fully alleviated just because a rescue plan has been cobbled together for Ireland as it deals with its banking crisis. The focus will now likely shift to other basket cases such as Portugal and Spain. Greece has a two-year lifeline before it defaults. This saga is going to continue for some time yet.
3. Massive tightening in U.S. fiscal policy coming via spending cuts and tax hikes. This is the part of the macro forecast that is not given enough attention. See States Raise Payroll Taxes to Repay Loans on page A5 of the weekend WSJ.
4. Gasoline prices are about six cents shy of re-testing the $3-a-gallon threshold for the first time since mid October 2008. On a national average basis, prices at the pump are up 26 cents from a year ago — effectively draining about $25 billion out of household cash flow. Tack on the coming
Overview of retail sales in November. On the surface, retail sales exceeded expectations, but there are a few underlying problems--for instance, increases in gasoline prices, sampling changes, and an unclear effect of a seasonal adjustment. - Ilene
Sales at U.S. retailers rose more than expected in November as consumers spent more on gasoline and a wide range of other goods, data showed on Friday, raising hopes of a self-sustaining economic recovery.
The Commerce Department said total retail sales increased 1.3 percent last month, the largest advance since August, after rising by a downwardly revised 1.1 percent in October. It was the second straight monthly gain. Sales in October were previously reported to have increased 1.4 percent.
Analysts polled by Reuters had forecast retail sales gaining 0.7 percent last month. Overall sales in November were boosted by strong receipts from gasoline stations, increased purchases of motor vehicles and parts, building materials and electronic goods among others. Gasoline sales surged 6 percent, the largest increase since June.
Compared to November last year, sales were up 1.9 percent, the first year-on-year gain since August 2008, a Commerce official said.
The Commerce Department reported that retail sales rose more than expected last month, up 1.3 percent in November after a gain of 1.1 percent in October. The November gain was the biggest increase since a 2.4 percent surge in August and brings the year-over-year change (unadjusted for inflation) back into positive territory for the first time in 15 months.
This came as something of a surprise to analysts because retailers across the country had been reporting lackluster sales during the holiday shopping season so far.
Though the overall increase was paced by a 6.0 percent gain in gasoline station sales, due largely to higher gasoline prices, gains were broad based, only three of the 13 retail sales categories posting declines. Excluding gasoline,
I am not pointing this stuff out to say "I told you so", I am simply aghast at what passes for reporting nowadays. It is also a good way to show, it really does not matter what reality is, it simply is our perception of reality. Since I’ve been around a while, and I know some portion of the readers are new to "the game", I am just trying to show you how it all ties together. Behold…
And in between these two auctions are tomorrow morning’s retail sales. Remember, when we analyze a government report we have to ignore everything the actual retail companies are saying in their reports and trust statisticians from D.C. (who know better than retailers on the ground) Since gasoline prices alone jumped substantially in the past month, this alone should provide "better than expected" retail sales (remember, high gasoline prices are a good think because they stoke monthly retail sales – just wait how "good" $4 gas will be for this number)… and boy oh boy the only thing the market needs to confirm green shoots is the "consumer is back".
As for economic reports we have a light week – we have a government retail report (in which we ignore everything the retailers are telling us and instead await the government to tell us what is correct)… with gas prices rising I can already see it now, we see futures surging Thursday as retail sales came in ‘better than expected’. No one will point out the fact that gas prices jumping month over month will account for much of the ‘surge in spending’.
So what was the headline today? You guessed it.
The Commerce Department said total retail sales rose 0.5 percent, the first advance in three months….
Gasoline sales jumped 3.6 percent in May after dropping 0.8 percent the previous month. Excluding gasoline, retail sales rose 0.2 percent.
Apache Corporation (NYSE, Nasdaq: APA) and its subsidiaries today announced an agreement to sell producing oil and gas assets in the Deep Basin area of western Alberta and British Columbia, Canada, for $374 million.
Incremental to Apache's earlier $2 billion share re-purchase announcement, the company plans to use the proceeds of this transaction to buy back Apache common shares under the 30-million-share repurchase program that was authorized by Apache's Board of Directors in 2013.
Apache is selling primarily dry gas-producing properties comprising 622,600 gross acres (328,400 net acres) in the Ojay, Noel and Wapiti areas in Alberta and British Columbia. In the Wapiti area, Apache will retain 100 percent of its working interest in horizons below the Cre...
Since Easter is a time of family, compassion, forgiveness and resurrection, I thought this would be a good weekend to think about the income inequality/wealth gap which will be part of the mid-term election debate. There are many questions that must be answered from not only “how” to solve the issue, but also “should” it be?
There is no historical evidence that wealth redistribution leads to stronger economic outcomes as it discourages “hard work.” However, there is also little argument that the current state of crony capitalism and corporate greed has gotten more than just a bit out of hand.
To start our thought process in this week’s things to ponder here is a study on the wealth inequality gap in America by P...
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The set-up coming into this past week was clean: SPX and NDX exhibited breadth extremes from which they usually bounce and April Opex is a seasonally strong week (post).
In the event, SPX rose nearly 3%. In the process it exhibited a familiar pattern: overnight gaps in the past 4 days accounted 60% of the week's gain. Cash hours, when liquidity is greatest, was not where the meat of the gains took place. That was even more true for RUT and NDX which only posted cash hour gains during two of the four days.
After a sharp drop and a strong bounce, where does that leave the markets? Let's run through each of our market indicators...
This one matters a lot. Abenomics was predicated on a lunatic notion—namely, that the economic ills from Japan’s massive debt overhang could be cured by a central bank bond buying spree that was designed to be nearly 3X larger relative to its GDP than that of the Fed. Yet anyone with a modicum of common sense and market...
Shares in Chipotle Mexican Grill Inc. (Ticker: CMG) opened higher on Thursday morning, rising more than 6.0% to $589.00, after the restaurant operator reported better than expected first-quarter sales ahead of the opening bell. But, the stock began to falter just before lunchtime on concerns the burrito-maker will increase menu prices for the first time in three years. The price of Chipotle’s shares have since fallen into negative territory and currently trade down 3.5% on the session at $532.89 as of 1:50 p.m. ET.
Last week’s market performance was nasty again, especially for the Small-cap Growth style/cap, down 4%. Large-caps faired the best, losing only 2.7%. That’s ugly and today’s market seemed likely to be uglier today with escalating tensions over the weekend in Ukraine.
But once again, positive economic trumped the beating of the war drums. Retail Sales jumped up 1.1% over a projected 0.8% and last month’s tepid 0.3%, which was revised up to 0.7%. While autos led, sales were up solidly overall. Business inventories were about as expected with a positive tone. Citigroup (C) handily beat estimates to add to the morning’s surprises. As a result, the market was positive through most of the day, led by the DJI, up 0.91%, and the S&P 500, up 0.82%. NASDAQ had a less...
[Facebook] The social network is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process.
The authorisation from Ireland’s central bank to become an “e-money” institution would allow ...
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I just wanted to be sure you saw this. There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.
If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.
Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.
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Ladies and Gentlemen, hobos and tramps,
Cross-eyed mosquitoes, and Bow-legged ants,
I come before you, To stand behind you,
To tell you something, I know nothing about.
And so the circus begins in Union Square, San Francisco for this weeks JP Morgan Healthcare Conference. Will the momentum from 2013, which carried the S&P Spider Biotech ETF to all time highs, carry on in 2014? The Biotech ETF beat the S&P by better than 3 points.
As I noted in my previous post, Biotechs Galore - IPOs and More, biotechs were rushing to IPOs so that venture capitalists could unwind their holdings (funds are usually 5-7 years), as well as take advantage of the opportune moment...
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