CHINA!!!
Think about how many companies pin their hopes and dreams on the infinite possibilities of selling stuff in China. If TSLA's stock can pop 10% because Musk announces he's going to put superchargers in China (he announced he'd put them in America 3 years ago – where are they exactly?), why does the stock then ignore declining auto sales in China or the slowdown of the whole economy over there?
The slide in Chinese manufacturing has been accelerating since the fall and we're in danger of breaking through a floor we haven't seen breached since we ignored it in early 2008 – the last time the MSM shrugged off a China slowdown as "no big deal."
How can China be the biggest deal in the World when you make a bull case but no big deal when it turns the other way? This is why investors are so confused about the markets – the information they are being fed is spun to CAUSE them to make poor investing decisions. Remember when the Senate investigated Goldman Sachs because, internally, they called $600M worth of Timberwolf Securities they were ACTIVELY selling to their investors a "shitty deal" while bonusing their "financial advisors" for pushing it on their clients.
The only thing unique about Timberwolf is that they got caught. China has been a "shitty deal" for years – I've been telling you for years but not the MSM, not the Fund Managers, not the Investment Professionals that get fees for whatever crap they get you to put your hard-earned money into – China is far away, hard to understand and even harder to verify – that makes it a perfect story for con men who want to get their hands on your money.
Like the US, China's growth story is a stimulus story. China's money supply grows faster than their economy and, in the past 5 years, as you can see on the chart, it's gone into hyper-drive with loans up almost 100%, which is ANOTHER 150% of the country's GDP in debt. China began their stimulus program in 2008, while our Congress was still arguing over TARP.
They have plunged their entire nation into massive debt (like us) in order to keep up GDP appearances (like us) and last week, just to confuse potential investors further – the MSM began talking our China's PPP (Purchase Power Parity) GDP surpassing the US. What utter nonsense that it – go to China and see what $9,844 buys you.
That's the trick though, isn't it? They know that you (the generic you, of course) aren't very likely to go to China and check out their story and you probably don't even know anyone who has gone to China unless they were fairly well off and had a nice vacation. That doesn't tell you anything about an economy. Knowing you can't check a story out is step one into conning people out of their money – it's the same scam they've been running for hundreds of years – because you'll believe almost anything if it supposedly happened "a long time ago, in a galaxy far, far away."
Instead of "amazing medicines and treasures from the far east" we now have BIDU and QIHU and soon we'll have Alibaba to invest in. We also have TSLA and 100 other companies who tell you how great their sales are going to be in CHINA!!!
But look at the chart above, even with the best estimates, the average Chinese citizen has just 20% of their counterparts in the US. How then, is China going to "save" us? I like that chart because it points out that China's economy is roughly on par with turn of the century America – an example I used to use with my consulting clients who were looking to do business in Asia.
This is not to say there's not business to be had in Asia. You can even sell $100,000 Teslas because, even if you went back to 1900 with a few hundreds Teslas – there'd be plenty of people rich enough to afford them then as well. I just wouldn't recommend opening up too many dealerships west of the Mississippi at those prices. Just like 1900s America, China is a vast nation that is only recently getting electricity, telephones, internet – and now it's being connected by rail and air and new cities are sprouting up along the transport routes.
The long-term growth story is definitely there – it's the expectations for the time-horizon I take issue with. China is benefiting from a well-educated, cheap labor force – just as we did in the 1900s, as people left the farms for the factories. That gave us a huge boom that lasted until 1929, when the farms began failing and a speculative bubble burst and the banking system collapsed. Think we're too smart to repeat those mistakes 100 years later? Think again:
China’s great real-estate bust has begun, says Nomura. A combination of a huge oversupply of housing and a shortage of developer financing is producing a housing market downturn that could drive China’s GDP to less than 6% this year.
“To us, it is no longer a question of ‘if’ but rather ‘how severe’ the property market correction will be,” three Nomura analysts wrote in a report released Monday. And there isn’t much the government can do to head off problems.
Nomura bases a lot of its argument on the observation that that property investment turned negative in four of China’s 26 provinces in the first quarter of 2014, and in two of them, Heilongjiang and Jilin, the fall was greater than 25%. To Nomura, that’s a warning sign of similar problems to come in other Chinese provinces. Falling investment leads to falling levels of construction and sales. And given the property market’s huge role in the Chinese economy, declining growth in the property sector means declining growth in GDP.
Japan, South Korea, Taiwan and Australia have already shown the negative effects of a Chinese slowdown on their economy and this morning, they were joined by Indonesia, whose GDP came in at just 5.21%, well below the 5.8% forecast – just like our GDP was 0.1% vs 1.1% forecast. China’s economic slowdown is weighing on the outlook for Indonesia’s exports even as the trade balance improves, Finance Minister Chatib Basri said May 2 in an interview with Bloomberg News in Astana, Kazakhstan, where he was attending the Asian Development Bank’s annual meeting.
This is why, once again we went back to CASH!!! last week. Not all cash (see our Member Portfolios) but "Cashy and Cautious" as we have not really been encouraged by the earnings reports we've seen so far. It's another heavy week of earnings and data with Yellen speaking Wednesday at 10am and 4 fed speakers on Thursday, including Yellen again at 9:30, ahead of a 30-year note auction where the US borrows another $60Bn to keep the lights on this month.
I wonder what they are saying about us in CHINA!!!?
albo – Yeah, IB shows Avg Price with commish factored in of $5.34. My actual fill was 0.2134. Although I really like that avg price as you don't have to guess what you need to get out of a trade to make it even.
Phil Going to be very large shortage of food! Wait till they all retire.
Good deal.
one order filled today… might as well have stayed in bed!
Albo
I assume yo remember AAPL over $700 as the all time high.
Shadowfax – Of course, who could forget that ? So far, unable to crack $600.
Short-Term Portfolio (STP):
Nice comeback on this one. Keep in mind that we EXPECT to LOSE money in this portfolio because its primary purpose is to hedge the Long-Term Portfolio. In addition to carrying our hedges, which are INSURANCE we expect to lose – we do indulge in some gambling BUT, we prefer bearish gambles because, again, it offsets our bullish, long-term positions.
Another factor in the STP, that we haven't done yet, is that, sometimes, a leg of a trade ends up qualifying to move to the LTP. If so, we essentially buy it from the STP with the LTP's cash. We have two bullish offsets that are short puts on CI and RIG that may end up moving, now that we're heading into May. No sense looking at them every day if we're not going to buy them back until 2016….
OK, that took a long time – we'll do the LTP tomorrow.
CAKE – …and their portions are HUGE !
albo
http://finance.yahoo.com/blogs/daily-ticker/the-tablet-market-s-problem-is-apple–not-the-other-way-around-133622341.html
Watch this one on tablets, may be a question on when a real new high but with possable 500 billion IPhones maybe $7,000. Of course heat trapping natural gas, farts, will kill everyone before they can use a phone/tablet.
It was a struggle, but AAPL closed above $600. First time since Oct.2012.
Alibaba/Burr – I assume it's better for their local markets. Lots of competition here, not as much in Asia. I agree on those spreads – basically, you're agreeing to buy a stock if it's cheap but, if it happens to take off – you get a nice bonus anyway.
Stop it Winston, you're making me hungry!
AAPL $599.73!
CAKE/Albo – True, usually you take something home and that's smart because people walk around the mall with Cheesecake Factory bags and then other people say "Mmmmmmm, let's go there…" It really is a great restaurant, good quality and not crazy expensive. Oh yes, another reason to BUYBUYBUY is they had a very high number of servers – that's a sign they are doing well. Also, the food came out fast for such a crowded place – you can see their kitchen, it's huge and state of the art (this was a Grand Lux Cafe).
AAPL/Shadow – I don't know, according to Bloomberg, there's still 495Bn people who don't have IPhones and IPads yet. As to AAPL's "problem" – analysts simply don't understand their business model – selling things that make money! They don't want to sell things that don't make money. All those "missing" sales are NOT PROFITABLE. Mercedes doesn't make $20,000 cars but lots of people buy them – should Mercedes change their business plan because other people sell similar cars for less money or should they keep selling cars with the highest margins in the auto industry?
Look at this chart – this is reality – only 7% of Samsung users were AAPL users but almost 60% of AAPL's users are switching in from other platforms – that's huge.
Wow, today went by fast. Things are getting interesting, I guess.
We're ending up barely positive but that S&P long was good for 12 points ($600), so we salvaged something out of it.
phil or anyone else/levels –
going back to the earlier post phil had today regarding what the key index levels presently are ..
in the spx chart – what does the 15% up line represent? what would constitute a must hold line?
thanks to anyone for the assist here
toepull / levels
These are relatively arbitrary numbers that phil uses to establish trading ranges. The numbers are based on the thesis that the markets are manipulated and so they follow specific patterns–the 5% rule. Unfortunately, they appear to be pretty accurate. Must Hold is the level that dictates very bearish behavior while "up 15%" is an index that is somewhat ahead of itself as the expectation is the indices will largely move in unison (due to manipulation).
The gist of it…as the indices (or stock) move through a 5% line and holds it for a couple days, you can consider the move to be relatively stable and that 5% line to provide support or resistance to another move through it.
It is with no small pleasure that I mention the birth of my second daughter, Charlotte Rose, at Mt. Sinai Medical Center in Miami today. Mother and child are resting comfortably, for which I am grateful.
Congrats Zero and good luck to Charlotte Rose and the happy parents!
0x0, congraz on U n family! 🙂
Felicidades !…….!Zero x zero
Is she your first?.
0x0:
Congrats on the happy event…. Enjoy the world through her eyes…..wonderful.
zxz – well done! All the best to you and yours,
Sent from Bloomberg for iPad
Watch this video at http://bloom.bg/1lScODI
Why Alibaba Is Using a Dual Class Share Structure
May 5 (Bloomberg) — If one-share-one-vote is the best ownership structure an investor can ask for, and having two classes of shares is worse, Alibaba Group Holding Ltd. will fall somewhere in between. Bloomberg’s Cory Johnson and Leslie Picker explain on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)
Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8
From Bloomberg, May 5, 2014, 12:01:00 PM
President Xi Jinping’s plans to open China’s state-owned enterprises to competition are spurring local officials to consider asset sales that could help rein in provincial and municipal debt.
To read the entire article, go to http://bloom.bg/1mww8Vx
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From Bloomberg, May 5, 2014, 12:34:05 AM
He speaks in London with Bloomberg’s Niki O’Callaghan. (Source: Bloomberg)
Options traders are the most
pessimistic on the offshore yuan in almost 10 months as the
currency slides and Taiwan cracks down on derivative products.
To read the entire article, go to http://bloom.bg/1iaXxwI
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From Bloomberg, May 5, 2014, 2:20:25 PM
In a world awash with U.S. government bonds, buyers of the longest-term Treasuries are facing a potential shortage of supply.
To read the entire article, go to http://bloom.bg/1q54Kny
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From Bloomberg, May 5, 2014, 4:28:04 PM
Chinese stocks trading in the U.S.
snapped a four-day gain as E-House China Holdings Ltd. (EJ) led a
drop in real-estate companies amid mounting concern that home
sales in the world’s second-largest economy are slowing.
To read the entire article, go to http://bloom.bg/1kFzkNi
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From Bloomberg, May 5, 2014, 7:01:01 PM
Mario Draghi may need to take action
to stop money-market investors getting ahead of themselves.
To read the entire article, go to http://bloom.bg/1lT2gV6
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Zero
Congratulations! I have missed your presence, but I now see you have been busy! 🙂
ZZ – Congratulations to you and your bride ! A blessed event for sure.
Zero – Congrats! Two PSW babies within a few days. We should get Jackie to pick us a 20yr stock that we can put in their 529's.
Congratulations Zero!
CNN – oh dear
http://www.examiner.com/article/cnn-stages-fake-interviews
Congrats Zero!
Apple on medical tech hiring spree, a possible hint of iWatch plans
From Barron's. I can't link since it's a pay site.
The Case for Lower Oil Prices
U.S. crude-oil output is soaring, but a number of factors point to a decline in oil prices, ranging from refinery shutdowns to futures strategies.
By
SIMON CONSTABLE
May 3, 2014 1:35 a.m. ET
DJ-AIG Commodity Indexes
Here's a puzzle: The U.S. is producing the most crude oil in decades, domestic stockpiles are at record highs, yet oil prices are near $100 barrel. What's keeping prices aloft?
The first piece of the puzzle is the way the U.S. prices its oil. The U.S. benchmark, known as West Texas Intermediate, or WTI, is based on delivery at a storage hub in Cushing, Okla. How much oil is stored in Cushing affects the price. At the moment, inventories of oil across the U.S. are at their highest going back to 1982, but Cushing has seen a steady drop since a new pipeline linking the hub to refineries along the Gulf Coast opened earlier this year.
The Cushing hub is "running on fumes," according to Société Générale, giving the appearance of tight supplies, and leading prices higher.
Another boost is from money managers, including hedge funds diving into the futures market. Financial firms betting on higher prices outnumbered those betting on a slide by 322,788 futures contracts as of April 22, almost double the number a year ago, according to the U.S. Commodity Futures Trading Commission.
There's more. The U.S. oil benchmark is also tracking global crude prices, which have been elevated by tensions between Russia and Ukraine. The threat of more-intense hostilities and the possibility of a supply outage will likely keep Brent crude, the global benchmark, higher until the situation is resolved, wrote Commerzbank in a recent report. Russia is the second-largest oil exporter after Saudi Arabia, and investors are concerned that Western sanctions in response to Moscow's encroachment on Ukraine could hinder the flow of crude.
Currently, WTI trades about $9 below Brent. U.S. oil prices settled Friday at $99.76 a barrel, up 1.4% for the year.
BUT THAT'S ONLY THE story so far. Analysts see plenty of reasons for oil prices to slide in the weeks ahead. Oil inventories are piling up in the South as several Gulf Coast refineries have temporarily shut down for maintenance, writes Michael Cohen, an analyst at Barclays in New York. Oil continues to flow to the Gulf Coast because it fetches a higher price there—that's the so-called Light Louisiana Sweet, or LLS—than it does in Cushing. But Cohen says transportation costs from Cushing to the Gulf Coast also add $3 to $4 a barrel.
However, the buildup of supplies on the Gulf Coast has started to weigh on the LLS price, and that will bring it closer to the U.S. benchmark price, Cohen says. As prices near parity, it makes less economic sense to send crude from Cushing to the Gulf Coast, which will help supplies at Cushing rebuild. When Cushing's stockpiles grow, WTI prices are likely to soften.
A threat to prices is also "posed by a potential wave of hedge-fund liquidation of existing long positions," Cohen wrote in March, referring to bets on higher prices. If hedge funds do dump a substantial part of those bets, $10 to $15 would be wiped off the price of a barrel, he wrote.
Finally, when the Ukraine crisis abates, Brent prices are likely to retreat, and with that, WTI prices may fall as well.
"It could be a while," but eventually prices should capitulate, says Michael Wittner, a global head of oil research at Société Générale in a recent research report.
Dollar drop spiked EUR/USD but not gold or silver. Was it a euro move rather than dollar?
Congratulations Zero!
Congrats to ZZ – all the best!
Futures are flattish so far and Asia was flattish and Europe is flattish and there's no much news, so we wait.
Oh, sorry, Dollar down to 79.19 is down 0.5% so I guess that's the big, BS news that's propping up the market. Nikkei hasn't reacted much to it yet, still 14,350 so shortable on that line (/NKD) but out if the Dollar bounces.
Oil still below $100, gold $1,310, silver $19.66 should be $19.80 with the Dollar down here, copper $3.06 is just sad, Nat gas $4.72 and gasoline $2.91.
Hang Seng was down 1.3% – that's worth noting. Shanghai was dead flat on a zig-zag day.
Levels/Toe – Try this one: "5% Rules! How Can We Be So Right?" There's also more discussion in the comments under the post. So, if you look at that 2nd S&P chart (weekly) above, you can see clear consolidation at S&P 1,880 (17.5%) and 1,840 (15%) after the breakout at 1,800 (12.5%) and those are 5% lines off our 1,600 Must Hold level that we have been charting since 2011 as our prediction for where this rally would top out.
20% is a normal overshoot and you can see in the NYSI chart above how we're way overbought up here. Between that and the fact that the Dow and NYSE don't confirm a move up and the RUT keeps testing the 10% line at 1,100 – we've been unable to move to a more bullish range, which means it's very unlikely that the S&P can break 1,900 without the Dow taking out 16,800 (the 5% line).
Arbitrary/JPH – They're not arbitrary, the key is to look for major consolidation levels on long-term charts and, once you identify the 5-year pattern, you can then zoom down and find matching consolidations on daily and even hourly charts. We also factor in overall market strength on volume and, of course, the Dollar before we make any major range changes and, when we do, we re-evaluate the indexes with the Dollar to determine the next set of Must Hold lines (as well as component changes) – this is something we don't even do once a year – even when the market explodes higher like it did last year (because there was no consolidation to prove new levels).
CNN/Scott – It's not news, it's entertainment. This is why I read the Times and never watch TV news (except Fox, which I force myself to do, to keep up with what they're ranting about).
Oil/Burr – I don't know why he says the Cushing Hub is running on fumes – it's not. Cushing, now that they've drained it with the new pipelines, is back to the historically normal 28Mb after being completely full at 50Mb earlier this year. It's all a matter of relative change there, not the total as it's just a transit hub for crude. If you look at the US Inventory Chart, you'll how ridiculous that statement is (and keep in mind we're now EXPORTING over 50Mb/month!).
Time to go to work!