Posts Tagged ‘stock prices’

JOHN HUSSMAN ISSUES A RECESSION WARNING

JOHN HUSSMAN ISSUES A RECESSION WARNING

Courtesy of The Pragmatic Capitalist

John Hussman is officially sounding the double dip siren.  He issued a similar call in November of 2007:

Based on evidence that has always and only been observed during or immediately prior to U.S. recessions, the U.S. economy appears headed into a second leg of an unusually challenging downturn.

A few weeks ago, I noted that our recession warning composite was on the brink of a signal that has always and only occurred during or immediately prior to U.S. recessions, the last signal being the warning I reported in the November 12, 2007 weekly comment Expecting A Recession. While the set of criteria I noted then would still require a decline in the ISM Purchasing Managers Index to 54 or less to complete a recession warning, what prompts my immediate concern is that the growth rate of the ECRI Weekly Leading Index has now declined to -6.9%. The WLI growth rate has historically demonstrated a strong correlation with the ISM Purchasing Managers Index, with the correlation being highest at a lead time of 13 weeks.

wmc100628a JOHN HUSSMAN ISSUES A RECESSION WARNING

Taking the growth rate of the WLI as a single indicator, the only instance when a level of -6.9% was not associated with an actual recession was a single observation in 1988. But as I’ve long noted, recession evidence is best taken as a syndrome of multiple conditions, including the behavior of the yield curve, credit spreads, stock prices, and employment growth. Given that the WLI growth rate leads the PMI by about 13 weeks, I substituted the WLI growth rate for the PMI criterion in condition 4 of our recession warning composite. As you can see, the results are nearly identical, and not surprisingly, are slightly more timely than using the PMI. The blue line indicates recession warning signals from the composite of indicators, while the red blocks indicate official U.S. recessions as identified by the National Bureau of Economic Research.

Read the full article here.

Source: Hussman Funds 


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The Shanghai market isn’t really predicting anything

The Shanghai market isn’t really predicting anything

Courtesy of Michael Pettis 

A man looks at an electronic board at a brokerage house in Shanghai

It has not been a good year for the Shanghai stock market.  Since its closing peak at 6092 in October 2007, the closing high in the past year or so on Shanghai’s SSE composite was 3471, on August 4 last year.  Since then the market has been pretty bleak.  The SSE Composite finished 2009 by dropping nearly 6% from that high, to close at 3277.

This year things got only worse.  By May 20 the market had dropped a further 22% to close at 2556, and then bounced around for the past ten days closing yesterday at 2568.  In my May 12 blog entry, I finished the piece by saying “Last Friday the SSE Composite closed at 2688.  I bet it is much higher by the end of the summer.” 

Obviously my timing was off.  Within a week of my prediction the market had managed to lose another 132 points.  I still believe that the market will be higher by the end of this summer, and that within weeks we will see moves by the regulators to prop it up.  With all the liquidity sloshing around, all we need is a reasonable period off stability before the market comes roaring back, I suspect.

So am I predicting a strong economy?  Not really.  It is tempting to read falling stock prices as an indication that Chinese investors believe that the economy is poised to slow dramatically, and if the market surges, that Chinese growth is back, but we should be very cautious about how we interpret the meaning of the gyrations in Chinese stocks. 

We’re used to thinking about stock markets as expected-cash-flow discounting machines, and we assume that stock price levels generally represent the market’s best estimate of future growth prospects, but this is not always the case, and it is certainly not the case in China.  I am often asked to comment on big price moves on the Chinese stock markets and what they mean about growth expectations, but I usually try to caution people from reading too much meaning into the market.

Three investment strategies

To see why, it is probably useful to understand how investors make trading decisions.  This blog entry is going to be a pretty abstract piece on how I think about the underlying dynamics of a well-functioning capital market, and how these…
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DID GOLDMAN SACHS MANIPULATE JOURNALISTS AND STOCK PRICE ON SAME DAY AS SENATE TESTIMONY?

Mark Ames, co-editor of The eXiled, suggests Goldman Sachs’s tentacles extend even farther than we may have imagined. Mark’s thought-provoking articles, such as "Confessions of a Wall St. Nihilist: Forget about Goldman Sachs, our Entire Economcy is Built on Fraud" and "Fraudonomics: 10 Fun Fraud Facts" are published at Mark’s online home, The-eXiled, and at the NY Press’s Fraudonomics

The eXiled itself has fascinating history, being the second incarnation of The eXile, The eXile was a "Moscow-based English-language biweekly free tabloid newspaper, aimed at the city’s expatriate community, [combining] outrageous, sometimes satirical, content with investigative reporting" (wikipedia).  Vanity Fair described The eXile as subversive, “gutsy …direct, visceral… serious journalism… abusive, defamatory… poignant… paranoid." The written version in Russia was closed down in 2008. The online sequel lives on.  - Ilene 

DID GOLDMAN SACHS MANIPULATE JOURNALISTS AND STOCK PRICE ON SAME DAY AS SENATE TESTIMONY?

Courtesy of Mark Ames  

William Hogarth's print

A reader brought to my attention a new rumor going around about the strange behavior of Goldman Sachs’s stock price. On April 27, the day Blankfein was dragged before Congress to testify about fraud, Goldman’s stock rose–even though every other financial stock in the S&P 500 dropped, all 78 of them, on a day when the overall S&P average tanked 2.3 percent.

According to Bloomberg that day:

Goldman Sachs Group Inc. had the only gain among 79 financial companies in the Standard & Poor’s 500 Indexas executives testified to a Senate subcommittee about mortgage securities.

Goldman Sachs advanced 0.7 percent to $153.04, while theS&P 500 Financials Index retreated 3.4 percent.

It’s an obvious question, just wondering if anyone has looked into this because as one reader wrote, “it makes no sense whatsoever.” Except as an expensive PR exercise funded by the bank’s insiders.

Whatever the case, that unexpected stock jump turned out to be wonderful news, the billionaires’ smackdown on all the resentful parasites trying to take down Goldman Sachs–this according to all sorts of media lickspittles who are rooting for Goldman. Here for example is The New York Daily News gloating over Goldman’s unexpected stock price rise:

I would be happy to let the whole United States Senate curse at me for just a fraction of the $2.8 million Goldman Sachs CEO Lloyd Blankfein made while he was testifying before a subcommittee this week.

The opinions of the senators carry so little weight that


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Carte Blanche for the Banksters

Carte Blanche for the Banksters

By MIKE WHITNEY writing at CounterPunch

Rear view of woman wearing fairy costume walking down a dirt road

Housing is still on the rocks and prices are headed lower. Master illusionist Ben Bernanke has managed to engineer a modest 7-month uptick in sales, but the fairydust is set to wear off later this month when the Fed stops purchasing mortgage-backed securities (MBS). When the program ends, long-term interest rates will creep higher and sales will begin to flag. The objective of Bernanke’s $1.25 trillion quantitative easing program was to transfer the banks’ toxic assets onto the Fed’s balance sheet.  Having achieved that goal, Bernanke will now have to find a way to unload those same assets onto the public. Freddie and Fannie, which have already been used as a government-backed off-balance-sheet dumping ground, appear to be the most likely candidates.

Bernanke’s liquidity injections have helped to buoy stock prices and stabilize housing, but the economy is still weak. There’s just too much inventory and  too few buyers. Now that the Fed is withdrawing its support, matters will only get worse.

Of course, that hasn’t stopped the folks at Bloomberg News from cheerleading the "nascent" housing rebound. Here’s a clip from Monday’s column:

"The U.S. housing market is poised to withstand the removal of government and Federal Reserve stimulus programs and rebound later in the year, contributing to annual economic growth for the first time since 2006. Increases in jobs, credit and affordable homes will help offset the end of the Fed’s purchases of mortgage-backed securities this month and the expiration of a federal homebuyer tax credit in April. ‘The underlying trend is turning positive,’ said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York."

Just for the record; there have been no "increases in jobs".  Unemployment is stuck at 9.7 percent with underemployment checking in at 16.8 percent. There’s no chance of housing rebound until payrolls start to rise. Jobless people cannot afford to buy homes.

Also, while it is true that the federal homebuyer tax credit did cause a spike in home purchases its effect has been short-lived and sales are gradually returning to normal. It’s generally believed that  "cash for clunker-type" programs (like the homebuyer tax credit) merely move demand forward and have no meaningful long-term impact.

So, it’s likely that housing prices — particularly on the higher end — will continue to fall until…
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How much money is Wells Fargo really making?

How much money is Wells Fargo really making?

Courtesy of Edward Harrison at Credit Writedowns

Wells FargoThe positive earnings announcement by Wells Fargo on Wednesday was marred by a sell recommendation from Dick Bove and a lot of chatter about credit writedowns and mortgage servicing rights (MSRs). I wanted to add a few words about the report, MSRs, and bank stocks more generally.

First of all, this has been a very good quarter for bank earnings. Many of the big names globally have surprised to the upside. this includes Goldman Sachs, Morgan Stanley, JPMorgan Chase, Wells Fargo, US Bancorp, SEB in Sweden, Credit Suisse in Switzerland and on down the line. As one would expect, most banks are profiting from record low interest rates.

The question for the big banks is whether the huge writedowns they are still taking and the run-up in their stock prices since march limits any upside in valuation. For smaller banks, we should expect weaker results as they are more leveraged to the sectors of the economy like commercial real estate and construction loans which are still suffering.  Goldman and Morgan Stanley should do relatively better as they are really broker-dealers and both investment banking and sales & trading are doing well right now. On the whole, I have said I think upside is limited for the sector, but downside is vast. Hence I am bearish on bank stocks.

Let’s look at Wells Fargo (WFC) as an example of what is happening.

Wells reports record profits

Wells reported net income of $32 billion, a robust operating pre-tax profit of $10.8 billion, and record net income of $3.2 billion. Sounds wonderful. What’s not to like?  That was bank analysts Dick Bove’s initial impression as well. Live on-air at CNBC, he said Wells Fargo “is proving itself to be a standout.”


But, once Bove got a peek under the hood and started to crunch the numbers at Wells, he was significantly less impressed – so much so that he issued a sell rating literally nine hours later. And he took a lot of flak for this about-face.

The Wall Street Journal’s Market Beat reports:

Prominent banking analyst Dick Bove, who caused a stir Wednesday with seemingly contradictory remarks on Wells Fargo, has decided he’ll no longer provide immediate earnings commentary on air.

“I’m not


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Why Goldman Sachs Is Bullish, Sort Of

Why Goldman Sachs Is Bullish, Sort Of

Goldman Sachs, stock marketCourtesy of TIME

It’s a bit odd these days that some of the most bullish things driving stock prices are not facts but opinions. Earlier in July there was a nice market bounce thanks to bullish comments by long bearish analyst Meredith Whitney. On Monday it was an opinion coming from the investment strategy team at Goldman Sachs, which reported that the firm was raising its estimate for what companies in the S&P 500 would earn this year and next.

Goldman’s strategists raised their expectation for 2009 earnings by 30%, and they hiked the 2010 outlook by 19%. With that boost, the 2010 earnings for S&P 500 companies should be 45% higher than 2009, Goldman says. Those hefty upward revisions, which sent investors on a buying spree, didn’t come because consumers are suddenly spending more, nor because housing is bouncing back, neither of which Goldman asserts. The lion’s share of Goldman’s new optimism derives from the fact that banks look more profitable now than they did several months ago. (Read "How to Know When the Economy Is Turning Up.")

Banks are seeing some light in their trading operations—Goldman Sachs is a star performer in that category—there’s more mortgage refinancing happening, and credit card problems may be bottoming, all good stuff, say Goldman’s strategists. But there’s another important reason the earnings for S&P financial stocks are looking better— many of the sickies are gone from the index, including Lehman Brothers, Fannie Mae and Freddie Mac.

It’s not just the banking stock group that benefits by offloading its weaklings. A stock sector known an ‘Consumer Discretionary,’ which includes everything from automakers to fast-food retailers, is enjoying a more bullish earnings outlook too, thanks— you guessed it— to the dropping of GM stock, which had been a load of lead to this sector’s profitability. As a result of offloading GM, earnings for the group are expected to rise by 35% in 2009 and 40% in 2010.

Investors may respond with huge cheers to the new earnings forecasts, but Goldman Sachs is not so ebullient. In fact, the firm goes to great lengths to point out the distortions to its growth projections, and adds that without the GM affect the consumer-discretionary stock group would see a far more modest 17% growth next year—not bad, but no blowout.

The other sobering note in Goldman’s bullish report today…
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Zero Hedge

Chicago PMI Prints Worst June Since 2008 As Employment Tumbles

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Chicago PMI has now missed 4 of the last 5 months and printed sub-50 contractionary indications for 4 of the last 5 months. June's data improved from May (rising from 46.2 to 49.4) but missed expectations and is the weakest June print since 2008. Notably, away from 2015, June's print is the weakest since September 2009. Under the covers it was ugly - employment plunged to the weakest since Nov 2009, order backlogs plunges to the lowest since September 2009, and prices paid rose again (pressuring margins).

June's print is the weakest June since 2008!

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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Beggar Thy Neighbor? Greece's Battered Banks Beget Balkan Jitters (Zero Hedge)

Back in April, we noted that central banks in Bulgaria, Cyprus, Albania, Romania, Serbia, Turkey and the Former Yugoslav Republic of Macedonia had all effectively moved to quarantine Greece, as it became increasingly apparent that negotiations between Athens and the troika were set to deteriorate ahead of a €750 million payment due to the IMF on May 12. 

...



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Phil's Favorites

Mr. "Lie When It's Serious" Juncker, Lectures Greece On the Truth; Coordinated Meddling

Courtesy of Mish.

Irony of the Day

In a bitter 40 minute lecture, European Commission president, Jean-Claude Juncker, lectures Greece on the "truth".

Other than being a pompous buffoon, Jean-Claude Juncker is most famous for his statement "When it becomes serious, you have to lie".

I believe it's safe to say that things are serious.

Coordinated Meddling

Please consider Eurozone Leaders Take Coordinated Gamble with Response to Athens
By publicly insisting that Greece’s referendum on Sunday is a choice about the country’s future in the eurozone, Europe’s leader...



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Chart School

Greece Strikes Back (or was it China?)

Courtesy of Declan.

A doubly whammy of weakness from Asian and European sessions left bulls with little room to stretch their legs. Not surprisingly, there were few willingly to make a commitment so bears had the market to themselves.  The good news is that today's decisive selling pushes markets out of their stiffing ranges. The S&P dropped below 2080, and is knocking on the door of 2040. Technicals are again net negative. The 200-day MA at 2053, just above the 2040 level, may play a role in tomorrow's action. While the Dow has already indicated a break from the March/July range. ...

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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Kimble Charting Solutions

King Dollar could be creating unhealthy bearish pattern!

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

The current news addiction of late revolves around Greece, closely followed by how the Euro will react this situation.

Taking a step back from the Greece noise, I wanted to take a look at the price action of the US$ over the past few months.

The US$ looks to have broken support and kissed the underside of old support as new resistance at (1), creating a third lower high. These lower highs could be the top of a bearish descending triangle pattern. (See Descending Pattern below)

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OpTrader

Swing trading portfolio - week of June 29th., 2015

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Digital Currencies

BitGold Now Available in US! Why BitGold?

Courtesy of Mish.

BitGold USA

Effective today, BitGold Announces Platform Launch in the United States.

BitGold, a platform for savings and payments in gold, is pleased to announce the launch of the BitGold platform for residents of the US and US territories. As of today, US residents can sign up on the BitGold platform and buy, sell, or redeem gold using BitGold’s Aurum payment and settlement technology. US residents will also have access to the BitGold mobile app and a prepaid card when these features launch over the coming weeks. Send and receive gold payment features are not initially available in the US.

About BitGold

...



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Sabrient

Sector Detector: Bulls under the gun to muster troops, while bears lie in wait

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of Sabrient Systems and Gradient Analytics

Two weeks ago, bulls seemed ready to push stocks higher as long-standing support reliably kicked in. But with just one full week to go before the Independence Day holiday week arrives, we will see if bulls can muster some reinforcements and make another run at the May highs. Small caps and NASDAQ are already there, but it is questionable whether those segments can drag along the broader market. To be sure, there is plenty of potential fuel floating around in the form of a friendly Fed and abundant global liquidity seeking the safety and strength of US stocks and bonds. While the technical picture has glimmers of strength, summer bears lie in wait.

In this weekly ...



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Pharmboy

Baxter's Spinoff

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).

The Baxalta Spinoff

By Ilene with Trevor of Lowenthal Capital Partners and Paul Price

In its recent filing with the SEC, Baxter provides:

“This information statement is being ...



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Mapping The Market

An update on oil proxies

Courtesy of Jean-Luc Saillard

Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself. 

Since...



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Promotions

Watch the Phil Davis Special on Money Talk on BNN TV!

Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene

 

The replay is now available on BNN's website. For the three part series, click on the links below. 

Part 1 is here (discussing the macro outlook for the markets) Part 2 is here. (discussing our main trading strategies) Part 3 is here. (reviewing our pick of th...

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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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