Posts Tagged ‘emerging markets’

Jeremy Grantham: Playing with fire, but stocks could race to old highs

Jeremy Grantham: Playing with fire, but stocks could race to old highs

Boy (7-9) holding sparkler, side view, night

Courtesy of Prieur du Plessis at Investment Postcards from Cape Town 

Jeremy Grantham has become a familiar and very popular face on this site. For those treasuring his insight, wisdom and prescient calls, the co-founder and chief investment strategist of Boston-based GMO has just published the April edition of his quarterly newsletter entitled “Playing with Fire (A Possible Race to the Old Highs)”.

Here are a few excerpts from Grantham’s newsletter.

“So what do I think will happen? That’s easy: I don’t know. We have been spoiled in the last 10 years with many near certainties – mainly that real bubbles would break – but this is definitely not one of them. Not yet anyway.  (However, I am still willing to play guessing games despite the fact that “I don’t know.” So here, as Exhibit 1, is my probability tree.)

“The general conclusion is that the line of least resistance is a market move in the next 18 months or so back to the old highs, say, 1500 to 1600 on the S&P, accompanied by an equivalent gain in most risk measures, followed once again by a very dangerous break. If that happens, rates will still be low and thus difficult to use as a jump starter, the financial system will still be fragile, and the piggybank will be more or less empty. It is remarkably silly for the Fed to allow, even encourage, this flight path. It is also remarkably silly for investors to be so carefree, given their recent experiences. Fortunately, there are several less likely outcomes that collectively,…
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WILL EMERGING MARKETS LEAD THE MARKET LOWER?

WILL EMERGING MARKETS LEAD THE MARKET LOWER?

Courtesy of The Pragmatic Capitalist 

MIT professor Simon Johnson says the next big down leg in the bear market will come from emerging markets:


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Free Money Thursday – 130 S&P New Highs Can’t Be Wrong!

130 S&P 500 companies hit 52-week highs yesterday.

Things must be even better than I thought in yesterday's post and there has been a conga line of pom-pom waving analysts on GE/CNBC this morning telling us how UNDER valued everything is because we just don't see the BIG PICTURE.  As Bespoke notes in their chart of the S&P and it's new highs, you want to see more and more stocks hitting new highs to sustain a rally but my question is – with the market now at 17-month highs and making new highs every day – what's up with the other 370 stocks? 

In an ordinary market, I wouldn't question it but this is not an ordinary market.  52 weeks ago we were at 666 on the S&P and stocks were making DECADE lows.  Here we are with the index up almost 80% off that bottom and we can't pull a lousy 52-week high from 2/3 of the index???  We'll be keeping an eye on this indicator to see how things pan out but notice when the market fell – there were no doubts, 80% of the stocks made 52-week lows last fall – not THAT'S a sell-off.  That's the kind of dramatic numbers you expect to see in a dramatic market move – not this wimpy 40% stuff – let's see some conviction people!

AAPL is convicted – they are up 191% from their lows and AAPL is 15% of the Nasdaq so, all by themselves, AAPL has accounted for 28% of the Nasdaq's move from 1,265 to 2,389 (89%).  TRV is also moving with conviction, up 54% since March and adding 160 much-needed points to the Dow, a great swap for C, who would have only added about 24 had they remained in the index.  CSCO replaced GM (because they are soooooo similar) and they too have been a great trade for the Dow, up 100% off the March lows and slapping 104 bonus points on the index. 

Ah, now we see how our industrials can do so well despite all the unemployment and lower cap utilization and lack of demand and high commodity input costs – we just shuffle the deck until we find a set of cards that work!   Even so, as I've pointed out this week, the Dow has been lagging the Nasdaq
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GURU OUTLOOK: FELIX ZULAUF & THE SECULAR BEAR MARKET

GURU OUTLOOK: FELIX ZULAUF & THE SECULAR BEAR MARKET

Courtesy of The Pragmatic Capitalist

guruThis week’s Guru Outlook brings us the brilliance of Felix Zulauf.  Zulauf is the founder of Zulauf Asset Management based in Switzerland and is well known for his appearances in Barron’s annual roundtable.   Zulauf has nailed the secular bear market downturn and 2009 upturn about as well as anyone.  More importantly, he has been nearly flawless in connecting the dots in the macro picture.  From the de-leveraging cycle that led to the downturn to the government stimulus that led to the upturn – Zulauf has been remarkably prescient.

At the 2008 roundtable Zulauf recommended investors purchase gold and short stocks due to concerns with the consumer.  He remained bearish throughout the year.  At the 2009 roundtable Zulauf said stocks would bottom at some point in the second quarter after making a new 2009 low.  He got aggressive and said stocks would rally after that.  His recommendations to purchase oil, gold and emerging markets were home runs.

Zulauf’s macro outlook hasn’t changed all that much.  He still believes the de-leveraging bear market cycle is with us and that we’re in the early stages.  Zulauf sees a number of similarities with Japan and says the consumer is in the process of long-term balance sheet repair:

“we are in the early stages of a deleveraging process, which is marked by a shift from maximizing profits to minimizing debt. It is a multiyear process. The U.S. consumer is in bad shape, and the U.K. consumer is even worse.”

But Zulauf hasn’t turned bearish in the short-term yet.  He says the markets have another 10% of upside before concerns over the end of the stimulus begin to weigh on the markets:

“Central bankers themselves are somewhat afraid of what they have been doing. Politicians are worried about public-sector debt. Therefore, the authorities will try to step away slowly from their stimulation efforts, because this policy isn’t sustainable. That’s the risk for the markets.  The U.S. stock market has enough momentum to rise another 10% or so. But the authorities will start leaning the other way as they see signs of economic growth in the first two quarters, and possibly a jump in inflation. That could push the market down.”


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PRUDENTIAL’S 2010 MARKET OUTLOOK

PRUDENTIAL’S 2010 MARKET OUTLOOK

Courtesy of The Pragmatic Capitalist

Businessman gazing into crystal ball

Strategists at Prudential are among the most bullish on Wall Street (for more very bullish outlooks please see RBC’s outlook, Merrill’s outlook & JP Morgan’s outlook).   They see further government stimulus, low interest rates and the inventory rebuild driving the S&P up to 1,350 by the end of 2010 for a full 23% rally from current prices.

They believe inflation is likely to remain low as slack in the economy, high unemployment and low capacity utilization keep prices under wraps.

They remain very bullish on equity markets for 5 primary reasons:

1) GDP rebound sustaining in Q4 and into 2010, and growth expectations being revised higher.

2) Q3 earnings surprising on the upside outlook and earnings recovering further in Q4 and 2010 with solid GDP growth, widening margins and improved pricing power.

3) Inflation moving from disinflation to low inflation with excess capacity and high unemployment.

4) Global central banks holding interest rates at crisis lows levels, long-term rates remaining low, and plenty of liquidity.

5) Continued stabilization in financial market conditions and risk appetite improving further.

How to play it?  They want to be overweight stocks and underweight bonds.  More specifically, they prefer emerging market and UK equities with a modest overweight in the Eurozone while being underweight Japan and the U.S.

In terms of sectors they prefer energy, info. tech, and materials with a modest overweight in financials and industrials.  They are neutral consumer discretionary with modest underweights in consumers staples and healthcare.  They underweight utilities and telecomm.

In the bond market they like emerging markets and Japanese debt with a modest overweight in UK debt.  They are neutral on the Eurozone and underweight US debt.

The tend is much the same in terms of forex.  They like the Euro and emerging market currencies, remain neutral on sterling & Yen with an underweight on the dollar.

Source: Prudential

 


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A Conversation with John

A Conversation with John

Courtesy of John Mauldin at Thoughts from the Frontline

Unemployment Positives

Michael Faraday (1791-

This morning’s unemployment number, though still down by 11,000, is the best we have seen in a very long time. The birth/death ratio only added 30,000 jobs, and previous months were revised upwards. Given that the ADP employment number on Wednesday was so high, and the service ISM was not good, this comes as a very pleasant and positive surprise. Is this a trend, or something seasonal because the main driver was temporary jobs? We will see in a few months. Let’s hope we see a real turnaround soon.

A Conversation with John

With Damien Hoffman of Wall St. Cheat Sheet

John Mauldin coined the incredibly popular phrase, "Muddle Through Economy." If the next few years continue to drag along as we rebuild from the greatest credit bubble in history, then John’s term may become the catch phrase used by every financial journalist and economist in the land.

John is a passionate traveler with business partners all over the world. He also puts out a free newsletter to over one million people worldwide. This reach of friends and travels give John an excellent macro view of the world economy. Further, his multidisciplinary interests offer some unique insights into economics and human behavior.

I had a chance to catch up with John and talk about his experiences as an economist, his perspective on which countries will grow the fastest in the coming decades, how he sees demographics affecting the world, and a bonus question from one of our 1400 Twitter followers …

Damien Hoffman: John, was economics part of your schooling or a passion of yours right from the start?

Rear view of Monks praying in front of a sculpture, Kanari Cave, Mumbai, Maharashtra, India

John: I had a triple major in college, one of them being economics and history. So I’ve always been fascinated by history, economics, and finance. The markets are a big puzzle to me and I’m a puzzle addict. So it feeds my addiction. I started reading the Austrian economists first, in the early ’80s as I entered the investment world. That was my real introduction to economics. Over time, if you stay around long enough and read enough, you can pick up all the other schools of thought, like I did.

Damien: Based on some of your newsletters,
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Dubai’s Spruce Goose Island Ventures

Dubai’s Spruce Goose Island Ventures

Courtesy of Adam Sharp at Bearish News

Dubai’s man-made islands are stunning technological achievements. But they may end up being the poster-children for this era’s reckless real estate ventures. These projects are turning out to play a big role in the ongoing debt crisis in Dubai.

Here’s “The World” island project:

dubai-world-islands

And here’s one of the three palm tree islands, where you can see construction underway:

dubai-palm-island

I remember being struck by the scale of the project while watching a Discovery Channel documentary. What a cool concept. Unfortunately, it looks like reality is catching up to this pipe dream.

Recent revelations show that the islands’ parent company, Nakheel PJSC, is in trouble. Their attempt to delay debt payments sparked a global selloff on 11/27. Fears of a debt crisis in Dubai spreading to other emerging markets (EM) roiled stocks.

Investors collectively paused the day after Thanksgiving, “Wait a sec… I thought emerging markets were going to be the engine driving us out of this mess… Now their bubbles are popping? Uhhh-Ohhh.”

Bloomberg provides a detailed example of island building gone-wrong:

Samsung C&T Corp., builder of the world’s tallest tower in Dubai, said it stopped work on a $350 million bridge in the city after a unit of Dubai World halted payments.

Construction of the half-finished bridge, to the man-made Palm Jebel Ali island, was suspended earlier this month after Nakheel PJSC made no payments for about two months, Cho Keun Ho, a spokesman for the Seoul-based builder, said today. Calls to Nakheel’s spokeswoman Anna McGovern went unanswered.

Not all emerging markets have the same debt issues Dubai does, of course. But there are tons of risky investments lurking out there, and they’re not just in EM (hint – many are hidden off US bank’s balance sheets).

Some are speculating that Dubai’s debt problems will be a catalyst, sparking major selloffs worldwide, particularly in EM. If so, I would think those countries with stronger balance sheets, like China, will fare better than those with high debt loads. That said, I am considering reducing my personal EM holdings, but haven’t done so yet.


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After Dubai, Is Greece Next?

After Dubai, Is Greece Next?

Courtesy of Joe Weisenthal at Clusterstock

Harbor of Skiathos

After you’ve gotten your Dubai fill, take a break and check out the situation in Greece.

Here’s the Telegraph from earlier this week:

When the European Central Bank’s Jean-Claude Trichet said last week that certain sinners on the edges of the eurozone were "very close to losing their credibility", everybody knew he meant Greece.

The interest spread between 10-year Greek bonds and German bunds has jumped to 178 basis points. Greek debt has decoupled from Italian debt. Athens can no longer hide behind others in EMU’s soft South.

"As far as the bond vigilantes are concerned, the Bat-Signal is up for Greece," said Francesco Garzarelli in a Goldman Sachs client note, Tremors at the EMU Periphery.

The newly-elected Hellenic Socialists (PASOK) of George Papandreou confess that the budget deficit will be more than 12pc of GDP this year, four times the original claim of the last lot. After campaigning on extra spending, it will have to do the exact opposite. "We need to save the country from bankruptcy," he said.

Good luck. Communist-led shipyard workers have already clashed violently with police. Some 200 anarchists were arrested in Athens last week after they torched streets of cars in a tear gas battle.

Read the whole thing >

 


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China is now on the same bubble path as Japan post-1987 crash

China is now on the same bubble path as Japan post-1987 crash

James Packer's 'City Of Dreams' Casino Opens In Macau

Courtesy of Credit Writedowns

This article by Peter Tasker, a well-regarded financial analyst in Asia, comes via the Financial Times (hat tip Marshall). He sees an enormous bubble forming in China – and parallels to Japan circa 1987:

Emerging markets, it seems, have had a good crisis. In contrast to the debt-ridden G7 economies, they have quickly resumed their growth trajectory. No surprise, then, that US emerging market mutual funds are experiencing record inflows. The stellar performance of the Brics markets – Brazil, Russia, Indian and China – is due to continue into the distant future.

Such is the narrative now forming among investors. To anyone who has lived through the rise and fall of the Japanese bubble economy, it should set off alarm bells.

Remember that it was in the years following the 1987 "Black Monday" crash that Japanese assets went from being expensive to absurdly overvalued and the Nikkei’s dizzy rise to 39,000 forced the bears to throw in the towel…

But what you saw was decidedly not what you got. The crisis, far from leaving Japan unscathed, exacerbated its structural problems and laid the groundwork for a far greater disaster…

Interest rates have been far too low for far too long. If the natural interest rate is, as the Swedish economist Knut Wicksell posited, around the level of nominal GDP growth, then China’s interest rates should have been close to 10 per cent for most of this decade. Alan Greenspan, former chief of the US Federal Reserve, has been criticised for holding interest rates too low and setting off a housing and credit bubble in the US. But if US monetary policy was wrong for the US, it was even more wrong for the high-growth countries that "imported" it. The result could only be a massive misallocation of capital…

At the 2008 peak, the price-to-book ratio of the Shanghai stock exchange was over seven times, well above the five times achieved by Japanese stocks in 1989. After the turbulence of the past 18 months, the ratio has fallen to 3.3 times, still the world’s second highest after India, and residential real estate trades at multiples of income that make the US housing boom look tame…

What is scary is that the current frothiness of emerging markets,


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WSJ – Small Investors Pile into Emerging Markets, Junk Bonds, and Commodities

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WSJ – Small Investors Pile into Emerging Markets, Junk Bonds, and Commodities

crowded trade, lemmings, small investorsPosted by TraderMark at Fund My Mutual Fund

If you’ve been around these markets for a while you generally know by the time the retail investor is piling into a group, chasing huge scores – it’s generally time to run away (at the least) and for the 5% among us who short, begin to think seriously about betting against the small fry. It sounds cold, but this is just the way it tends to work … trust me, I used to be one of these people, so I learned the hard (read: expensive) way. As we read the piece below let us trust in the fact that none of these people were buying in early March, but most likely jumped in when it was "safe" a month or so later.

Contrast the lemmings running into "what’s hot" with what you’ve been reading here – about a month ago I was saying commodities is crowded and I would not want to be exposed highly there. People who heeded that thought process avoided the sand blasting that has gone on for 3 weeks running in this sector. While I do like these emerging markets for the long term, I think they are vulnerable here as well; some are beginning to roll over – Russia has already been in a "technical" bear market (down over 20% from peak). And I am saying the same thing I said in commodities a month ago, now for the latest darling – technology. It is crowded – everyone is hiding there. Beware.

I don’t really talk much bonds but while junk bonds (highest risk) has provided the most juice the past 3-4 months, its basically been a parallel to the stock market. The ‘worst of breed’ has run up the most as green shoots flower across the world. Just as with the green shoots themselves, I find the junk bond love way premature. This economy is stalled and I expect many more companies to suffer – so buying bonds of the worst seems not such a great intermediate term strategy. I’d be more interested


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Phil's Favorites

5 COVID-19 myths politicians have repeated that just aren't true

 

5 COVID-19 myths politicians have repeated that just aren't true

The purveyors of these myths aren’t doing the country any favors. Brendan Smialowski/AFP/Getty Images

Courtesy of Geoffrey Joyce, University of Southern California

The number of new COVID-19 cases in the U.S. has jumped to around 50,000 a day, and the virus has killed more than 130,000 Americans. Yet, I still hear myths about the infection that has created the worst public health crisis in A...



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Biotech/COVID-19

5 COVID-19 myths politicians have repeated that just aren't true

 

5 COVID-19 myths politicians have repeated that just aren't true

The purveyors of these myths aren’t doing the country any favors. Brendan Smialowski/AFP/Getty Images

Courtesy of Geoffrey Joyce, University of Southern California

The number of new COVID-19 cases in the U.S. has jumped to around 50,000 a day, and the virus has killed more than 130,000 Americans. Yet, I still hear myths about the infection that has created the worst public health crisis in A...



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ValueWalk

Hedge Funds And The Spirit Of The PPP Program

By Jacob Wolinsky. Originally published at ValueWalk.

Letter to the editor: I had noted a few months ago that many of these firms getting the PPP loans were not ‘in the spirit’ of the program.

Q2 2020 hedge fund letters, conferences and more

The Spirit Of The PPP Program

Without any real 'oversight' the compliance part of these loans seems - - - questionable --- on some.  I am not sure how it all really works, but the American public likely believes these funds should have gone to the 'small business', with waiters, waitresses, or bartenders who obviously couldn't work.  This was th...



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Zero Hedge

DoJ, FTC Investigating TikTok Over Child Privacy Violations

Courtesy of ZeroHedge View original post here.

Update (1840ET): Not long after President Trump confirmed that the administration is "looking into" banning TikTok, Reuters has reported that the DoJ and FTC are, in fact, looking into probing TikTok over allegations the company violated a 2019 agreement where it promised to protect children's privacy.

And instead of citing the usual anonymous sources, the report cited officials from various nonprofit groups who claimed that officials from the DoJ and FTC had met with them over compla...



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The Technical Traders

Credit/Investments Turned Into End-User Risk Again

Courtesy of Technical Traders

Continuing our research from Part I, into what to expect in Q2 and Q3 of 2020, we’ll start by discussing our Adaptive Dynamic Learning predictive modeling system and our belief that the US stock market is rallied beyond proper expectation levels.  The Adaptive Dynamic Learning (ADL) modeling systems attempts to identify price and technical indicator DNA markers and attempts to map our these...



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Kimble Charting Solutions

Here's Why QQQ and Large Cap Tech Stocks May Rally Another 10%!

Courtesy of Chris Kimble

The long-term trend for large-cap tech stocks remains strongly in place.

And despite the steep rally out of the March lows, the index may be headed 10 percent higher.

Today’s chart highlights the $QQQ Nasdaq 100 ETF on a “monthly” basis. As you can see, the large-cap tech index touched its lower up-trend channel support in March at (1) before reversing higher.

It may now be targeting the top of the trend channel at (2), which also marks the 261.8 Fibonacci extension (based on 2000 highs and 2002 lows). That Fib level is $290 on $QQQ.

If so, this upside target for $QQQ is still 10% above current prices. Stay tuned!

This article was first written ...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker

Please review a collection of WWW browsing results. The information here is delayed by a few months, members get the most recent content.



Date Found: Saturday, 14 March 2020, 05:51:16 PM

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Comment: Crash in perspective - its Bad, and not over!



Date Found: Saturday, 14 March 2020, 07:49:29 PM

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Comment: The Blood Bath Has Begun youtu.be/bmC8k1qmM0s



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Lee's Free Thinking

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

 

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

Courtesy of  

The COVID 19 pandemic is, predictably, worsening again in much of the US. Only the Northeast, and to a lesser extent some Midwestern states, have been consistently improving. And that trend could also reverse as those states fully reopen.

The problem in the US seems to be widespread public resistance to recommended practices of social distancing and mask wearing. In countries where these practices have been practi...



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Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

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TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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About Phil:

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...

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