Non-Manufacturing ISM Plunges Below Prediction of All 73 Economists, New Orders Collapse, Prices Firm; Did Rosenberg Capitulate at the Top?
by ilene - May 4th, 2011 2:14 pm
Courtesy of Mish
The April 2011 Non-Manufacturing ISM plunged 4.5 points to 52.8 from 57.3 The drop was below expected range of all 73 economists in a Bloomberg ISM Survey.
The range of economists’ forecasts in the Bloomberg survey was 54.5 to 59 with the median forecast up a tick to 57.4.
Tellingly, new orders collapsed by 11.4 points from 64.1 to 52.7. Employment, one of the weaker measures and up only 8 consecutive months fell to 51.9. One more reasonably bad month and services employment will contract.
Please consider the April 2011 Non-Manufacturing ISM Report On Business®
Economic activity in the non-manufacturing sector grew in April for the 17th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.
click on chart for sharper image
New Orders
The 12 industries reporting growth of new orders in April — listed in order — are: Management of Companies & Support Services; Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Mining; Real Estate, Rental & Leasing; Wholesale Trade; Information; Health Care & Social Assistance; Public Administration; Construction; Other Services; and Educational Services. The four industries reporting contraction of new orders in April are: Finance & Insurance; Retail Trade; Professional, Scientific & Technical Services; and Utilities.
Employment
Twelve industries reported increased employment, five industries reported decreased employment, and one industry reported unchanged employment compared to March.
The industries reporting an increase in employment in April — listed in order — are: Arts, Entertainment & Recreation; Mining; Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Other Services; Information; Construction; Accommodation & Food Services; Finance & Insurance; Public Administration; Wholesale Trade; and Transportation & Warehousing. The industries reporting a reduction in employment in April are: Real Estate, Rental & Leasing; Educational Services; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Utilities.
Prices
For the second consecutive month, all 18 non-manufacturing industries reported an increase in prices paid, in the following order: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Arts, Entertainment & Recreation; Construction; Wholesale Trade; Accommodation & Food Services; Finance & Insurance; Transportation & Warehousing; Real Estate, Rental & Leasing; Management of Companies & Support Services; Educational Services; Professional, Scientific & Technical Services; Retail Trade; Public Administration; Information; Health Care & Social Assistance; and Other Services.
ISM Prices Firm, What About Profits?
This was a…
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MARKETS DEFY GRAVITY
by ilene - January 27th, 2011 3:10 am
By Surly Trader
Since the beginning of December, the S&P 500 has yet to meaningfully break down below its 10 day moving average. We just like to blissfully crank upwards in valuations. The Dow has hit its momentous 12,000 level and the S&P was inches away from 1,300. Now that we have touched our psychological targets, maybe it is time we reassess how enthusiastic we have gotten. Instead of looking at P/E ratios on 2011 earnings forecasts, I have seen more and more analysts consider 2012 and 2013 forecasts…
I guess our 10 day moving average is a fixed positive slope
When it comes to the lesser of investment evils, it certainly still looks like equities are more attractive than bonds. The issue that I have is that most investors have set aside the significant tail risks that are out there. Not to belabor the point, but there is still significant risk in the Eurozone. Equity markets have ignored it, as well as concerns with local municipalities and states. These risks are real and will take quite a long time to resolve. While the VIX sits around 16 and realized volatility hovers near six year lows, we need to understand that risk flares come quickly and unexpectedly and there are plenty of issues that could precipitate are run.
The default spreads on the PIGS do not appear resolved to me so why is the Euro rallying?
I do not like to be negative, but it does get tiring when the arguments switch so fiercely from bearish to bullish stances. It seems to be the psychology of not wanting to be miss out when the market is rallying or not wanting to be the last one in when the market is tanking. Feast or Famine, no in-between.
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INVESTORS HAVEN’T BEEN THIS BULLISH SINCE 2007 MARKET PEAK
by ilene - November 18th, 2010 3:50 pm
INVESTORS HAVEN’T BEEN THIS BULLISH SINCE 2007 MARKET PEAK
Courtesy of The Pragmatic Capitalist
Being bearish is officially out of style. Sentiment readings have reached well beyond excessively bullish levels. The most recent Investor’s Intelligence survey showed another sharp increase in bullishness at 56.2%. This 7.6% surge in bullishness is the largest one week jump since April 2010. At 56.2% this is also the highest reading since December 2007. The last time bullishness was even near these levels was April 28th, 2010 just days before the flash crash.
Last week’s AAII survey also showed extraordinarily high levels of bullishness at 57.6%. This reading is literally off the charts and almost 10 points higher than bullish sentiment at the April highs.
Bespoke Investments highlighted how unusual it is to see both of these sentiment polls at such high levels:
“At a current level of 113.8%, the combined reading is the highest since mid-October 2007, which was shortly after the S&P 500 reached its all-time closing high of 1,565.15. More recently, the last time combined bullish sentiment was above 100% was in April 2010.”
“Buy the dip” and “don’t fight the Fed” have become universal rally cries in recent weeks. It now appears as though no one believes the market can sustain a decline. Unfortunately, the market generally frustrates the most people most of the time. If that saying rings true today the market is at a particularly risky juncture.
*AAII survey will be updated tomorrow after its latest release.
Update: AAII sentiment fell 17.6% this week to 40%. According to Charles Rotblut this is the largest decline since January 2009. Like the current reading, that decline followed a multi month high in sentiment. The market ultimately plunged until sentiment hit its low of 19% in March 2009.
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Sure Thing?!
by ilene - September 29th, 2010 1:23 am
Sure Thing?!
Courtesy of Mish
Last week, David Tepper, a billionaire hedge fund titan and president of Appaloosa Management remarked on CNBC …
Two things are happening. It’s that easy sometimes. Either the economy is going to get better by itself, in the next 3 months and what assets are going to do well? You can guess what assets will do well – stocks are going to do well, bonds won’t do so well, gold won’t do as well. OR The economy is not going to pick up in the next three months and the Fed is going to come in with QE. Right? Then what’s going to do well? Everything! In the near term – Everything!
Video
Earnings vs. Share Prices
One might not be able to argue with Tepper’s past performance, but one sure can argue with his current logic. Stocks do not necessarily go up because earnings go up. Stocks rise or fall primarily based on sentiment.
Right now, sentiment is so bullish and earnings estimates so lofty there is room for hefty earnings expansion that falls short or estimates. Buying stocks that miss wildly optimistic earnings estimates is not likely to work out well.
Furthermore, even if earnings do come in on target, there is no historic guarantee that stock prices follow. For example, on March 31, 1973 the S& P was at 111.52 with trailing earnings of $6.80. Seven years later, on March 31, 1980 the S&P was at 102.09 with trailing earnings of $15.27.
Thus, over a span of seven years, earning rose 125% while stock prices fell 8.5%!
What happened? The PE ratio on the S&P fell from 16.40 to 6.68, that’s what.
Moreover, those were real earnings then. Now, corporations hide garbage in SIVs with the blessing of the Fed and analysts cite pro-forma earnings that throw out "one-time" charges that occur with increasing regularity.
Thus, anyone who says stock prices will go up because earnings go up, does not understand history. This does not make Tepper wrong, but it does make his argument fallacious.
What About Quantitative Easing?
Tepper also argues that everything will be good if the Fed falls back on quantitative easing. Really?
The Cleveland Fed has a series of nice charts on Japan’s Quantitative Easing Policy
Japan’s Quantitative Easing vs. Price Inflation
Japan’s Quantitative Easing in Trillions of Yen
After a series
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Bullish….Bearish… or Neither
by Chart School - September 24th, 2010 4:50 pm
Bullish….Bearish… or Neither
Courtesy of Chris Kimble
Am I Bullish, Bearish or Neither?
Choice “C”…Niether!
I am of the opinion, being Bullish or Bearish are emotional states of mind. They are NOT STRATEGIES. I believe that we should invest in each asset on its own individual merits/patterns, not based upon some global macro prediction.
Did I suggest to buy the 500 index (see post) and become “BULLISH” on 8/29 because the economy was fine? NO! Bought the 500 Index due to these conditions…Bottom of channel support and a falling wedge and by the way, the fewest investors bullish since the March 2009 low. NOTHING MORE!
Did I harvest the S&P 500 position and become “BEARISH” yesterday (see post) , after an 8% gain in three weeks, because something is bad about the economy? NO! Harvested due to Fibonacci resistance at the top of a trading range. NOTHING MORE!
Did I buy Silver a month ago (see post) because something is wrong with the dollar or that inflation is going to go wild or….NOPE! I bought Silver on an upside breakout from a favorable pattern, an ascending triangle . NOTHING MORE!
Why own Emerging Markets or Brazil right now? Falling channel breakouts! (See Post) NOTHING MORE!
Why own High Yield mutual funds? A breakout of a flag pattern and above moving averages (see post) . NOTHING MORE!
Why BUY HOME BUILDERS XHB (see post) when so many people are BEARISH on this industry? Because of rising channel support plus a sizeable falling wedge after a 30% decline. NOTHING MORE! (Current gain of over 12%!)
Will we buy the 500 index and other global markets (see post) on an upside break of these long-term falling channels? YES!!!
My goal is to try to provide solutions, that will help investors “inflate portfolios, regardless of market direction by way of the Power of the Pattern!” I will leave the Bullish or Bearish elements of this business to people much smarter than myself.
Chris
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Bullish….Bearish… or Neither
by ilene - September 24th, 2010 1:29 pm
Chris, on being neitherish, i.e., how he views the markets. – Ilene
Bullish….Bearish… or Neither
Courtesy of Chris Kimble
Am I Bullish, Bearish or Neither?
Choice “C”…Niether!
I am of the opinion, being Bullish or Bearish are emotional states of mind. They are NOT STRATEGIES. I believe that we should invest in each asset on its own individual merits/patterns, not based upon some global macro prediction.
Did I suggest to buy the 500 index (see post) and become “BULLISH” on 8/29 because the economy was fine? NO! Bought the 500 Index due to these conditions…Bottom of channel support and a falling wedge and by the way, the fewest investors bullish since the March 2009 low. NOTHING MORE!
Did I harvest the S&P 500 position and become “BEARISH” yesterday (see post) , after an 8% gain in three weeks, because something is bad about the economy? NO! Harvested due to Fibonacci resistance at the top of a trading range. NOTHING MORE!
Did I buy Silver a month ago (see post) because something is wrong with the dollar or that inflation is going to go wild or….NOPE! I bought Silver on an upside breakout from a favorable pattern, an ascending triangle . NOTHING MORE!
Why own Emerging Markets or Brazil right now? Falling channel breakouts! (See Post) NOTHING MORE!
Why own High Yield mutual funds? A breakout of a flag pattern and above moving averages (see post) . NOTHING MORE!
Why BUY HOME BUILDERS XHB (see post) when so many people are BEARISH on this industry? Because of rising channel support plus a sizeable falling wedge after a 30% decline. NOTHING MORE! (Current gain of over 12%!)
Will we buy the 500 index and other global markets (see post) on an upside break of these long-term falling channels? YES!!!
My goal is to try to provide solutions, that will help investors “inflate portfolios, regardless of market direction by way of the Power of the Pattern!” I will leave the Bullish or Bearish elements of this business to people much smarter than myself.
Chris
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MUTUAL FUNDS ARE “ALL IN”
by ilene - September 13th, 2010 9:37 pm
MUTUAL FUNDS ARE “ALL IN”
Courtesy of The Pragmatic Capitalist
Eric King posted this interesting chart showing mutual
“The percentage of liquid assets (aka mutual cash levels) was 3.4% in July. This is the lowest percentage cash level ever and is near levels that accompanied the 2007 equity market peak.”
You’re likely familiar with the myth of cash on the sidelines, however, if mutual
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Billionaire Ken Fisher Explains His Biases
by ilene - August 21st, 2010 5:06 pm
Billionaire Ken Fisher Explains His Biases
Courtesy of Mish
Ken Fisher says high levels of pessimism are a reason to buy stocks. Please consider Kenneth Fisher Recommends Stocks as Pessimism Surges.
Rising levels of investor pessimism are a reason to buy equities now, billionaire Kenneth Fisher said today.
“I’m never going to be bearish when people are pessimistic,” Fisher, who oversees $35 billion from Woodside, California, said in an interview on “Bloomberg Surveillance” with Tom Keene. “My bias when pessimism is high is to own equities.”
Explaining Ken Fisher’s Bias
Ken Fisher’s bias is to own stocks come hell or high water. Fisher’s recommendations have as much to do with optimism or pessimism as the planet Pluto does with an octopus.
Fisher makes money being perpetually bullish on equities. It certainly helps that Fisher peddles advice that people and pension funds want to hear.
It is amazing how much money one can make mismanaging money in conjunction with a remarkably successful advertising program.
Addendum
Flashback February 26, 2007
Housing Boom!
For months now the debate has been over whether America will have a hard landing or soft landing, the answer hinging on how big 2007′s housing disaster turns out to be. Well, there won’t be any housing disaster. We won’t have a landing at all, soft or hard. Right now the U.S. and global economies are both accelerating.
The consensus forecast is for single-digit S&P 500 earnings growth tied to a slowing economy. Disbelieve it. Experts’ forecasts have been too low for four years and will be now. First, the accelerating economy will deliver earnings that exceed expectations.
This is a time to own stocks. Here are some companies that will participate in the prosperous economy of 2007:
Home builder Pulte Homes – PHM
Toll Brothers – TOL
Beazer Homes – BZH
Absurdities
Look – Anyone can be wrong, but quite frankly that is absurdly wrong.
Pulte Homes was $34 then. It is $8 now.
Toll Brothers was $34 then. It is $16 now.
Beazer Homes was $44 then. It is $3.75 now.
Someone let me know if he ever issued a sell signal on those.
Regardless, Ken Fisher is consistently bullish. In fact he HAS to be bullish because you cannot manage $35 billion without being bullish. Ken Fisher’s advice is designed to do one thing – make money for Ken Fisher.
Photo from Psychology Today.
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17 REASONS TO BE BULLISH
by ilene - July 24th, 2010 9:55 pm
David Rosenberg (the bear) takes a walk on the bullish side and here’s what he finds to be optimistic about. – Ilene
17 REASONS TO BE BULLISH
Courtesy of The Pragmatic Capitalist
Regular readers know I tend to focus on the negative aspects of the markets as opposed to the positives – anyone could put on a smile and skip through oncoming traffic, but the truth is, the investment world can be a very dangerous place so skipping along as if there are no risks involved is beyond foolish. But ignoring the positives is equally foolish. In this world of heightened market risks and particularly clear uncertainty here are 17 reasons to consider the bullish case (via David Rosenberg at Gluskin Sheff):
- Congress extending jobless benefits (yet again).
- Polls showing the GoP can take the House and the Senate in November.
- Some Democrats now want the tax hikes for 2011 to be delayed.
- Cap and trade is dead.
- Cameron’s popularity in the U.K. and market reaction there is setting an example for others regarding budgetary reform.
- China’s success in curbing its property bubble without bursting it.
- Growing confidence that the emerging markets, especially in Asia and Latin America, will be able to ‘decouple’ this time around. We heard this from more than just one CEO on our recent trip to NYC and Asian thumbprints were all over the positive news these past few weeks out of the likes of FedEx and UPS.
- Renewed stability in Eurozone debt and money markets – including successful bond auctions amongst the Club Med members.
- Clarity with respect to European bank vulnerability.
- Signs that consumer credit delinquency rates in the U.S. are rolling over.
- Mortgage delinquencies down five quarters in a row in California to a three-year low.
- The BP oil spill moving off the front pages.
- The financial regulation bill behind us and Goldman deciding to settle –more uncertainty out of the way.
- Widespread refutation of the ECRI as a leading indicator … even among the architects of the index! There is tremendous conviction now that a double-dip will be averted, even though 85% of the data releases in the past month have come in below expectations.
- Earnings
season living up to expectations, especially among some key large-caps in the tech/industrial space – Microsoft, AT&T, CAT, and 3M are being viewed as game changers (especially 3M’s upped guidance).
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STAT OF THE DAY: 93% OF ANALYSTS EXPECT S&P TO RALLY HIGHER
by ilene - March 19th, 2010 6:19 pm
STAT OF THE DAY: 93% OF ANALYSTS EXPECT S&P TO RALLY HIGHER
Courtesy of The Pragmatic Capitalist
As if sentiment wasn’t already starting to get a bit too bullish! The latest compilation of analyst estimates and year-end targets is now calling for substantially higher earnings and equity prices. Of the 13 major banks, JUST ONE (Andrew Garthwaite of Credit Suisse) is calling for the S&P 500 to finish the year below the current level. We’ve covered Garthwaite’s full year outlook and it’s very much in-line with our own – a relatively robust first half and a dicey second half. On the other end of the spectrum is Binky Chadha whose price target sits at 1325.
Firm Strategist 2010 Close 2010 EPS =============================================================== Bank of America David Bianco 1,275 $75.00 Bank of Montreal Ben Joyce 1,225 $74.50 Barclays Barry Knapp 1,210 $71.00 Citigroup Tobias Levkovich 1,175 $76.50 Credit Suisse Andrew Garthwaite 1,125 $77.00 Deutsche Bank Binky Chadha 1,325 $80.80 Goldman Sachs David Kostin 1,250 $76.00 HSBC Garry Evans 1,300 JPMorgan Thomas Lee 1,300 $81.00 Morgan Stanley Jason Todd 1,200 $77.00 Oppenheimer Brian Belski 1,300 $76.00 RBC Myles Zyblock 1,225 $76.00 UBS Thomas Doerflinger 1,250 $81.00 --------------------------------------------------------------- Mean 1,243 $76.82 Median 1,250 $76.25 High 1,325 $81.00 Low 1,125 $71.00
Source: Bloomberg
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site