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John Kerry Speaks On Ukraine De-escalation: Live Webcast

Zerohedge - Thu, 04/17/2014 - 10:46

First it was Lavrov announcing the "roadmap" to de-escalate Ukraine tensions. Now it is the turn of John Kerry.


Some of the highlights via Bloomberg:


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Trade Update – Gold

Emerging Money - Thu, 04/17/2014 - 10:33

Gold continues to see pressure from the US economy as the spring thaw is yielding strong macro from the formerly frozen US economy. 

//www.flickr.com/people/digitalcurrency/Gold doesn’t like that…nor should gold investors who cannot get any yield from a gold investment…


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Categories: blogroll

Russian Foreign Minister Announces Four Party Agreement On Steps To De-escalate Ukraine Crisis

Zerohedge - Thu, 04/17/2014 - 10:27

Considering how successful diplomatic "solutions" to the Ukraine crisis have been in the past, it is no wonder almost nobody was paying attention to Geneva where today the four parties were holding talks to resolve the Ukraine situation, and moments ago they released, via Russia's Lavrov, a joint statement on "de-escalating the situation." From Bloomberg:


And, approrpiately enough, the Easter Egg:


In other words, more referendums? For now stocks aren't reacting exactly bullishly (perhaps because as UBS recently suggested, with a straight face, "war may be bullish for US stocks"), however, oil is lower on the news.

We wonder how long until this too "diplomatic" solution is promptly ignored and forgotten: days or hours?

The Lavrov conference is here:

Categories: blogroll

Housing Bubble 2.0 Veers Elegantly Toward Housing Bust 2.0

Zerohedge - Thu, 04/17/2014 - 10:20

Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter

They’re not even trying to blame the weather this time. “Housing affordability is really taking a bite out of the market,” is how Leslie Appleton-Young, chief economist for the California Association of Realtors explained the March home sales fiasco. “We haven’t seen this issue since 2007.”

In Southern California, the median price soared to a six-year high of $400,000, up 15.8% from a year ago, as San Diego-based DataQuick reported. It was the 24th month in a row of price increases, 20 of them in the double digits, maxing out at 28.3%. Ironically, prices per square foot are increasing fasted at the bottom third of the market (up 21%), versus the middle third (up 15.9%) and the top third (up 14.3%).

Ironically, because at the bottom 65%, sales have collapsed.

People, wheezing under the weight of their student loans and struggling in a tough economy where real wages have declined for years, hit a wall. Private equity firms and REITs, prime beneficiaries of the Fed’s nearly free money, gobbled up vacant homes sight unseen in order to convert them into rental housing, and in the process pushed up prices - exactly what the Fed wanted. But now high prices torpedoed their business model, and they’re backing off. So sales of homes priced below $500,000 plunged 26.4%, and sales of homes below $200,000 collapsed by 45.7%.

These aren’t poor people who stopped buying them but two-income middle-class families who’ve been priced out of the market. Thanks to the Fed’s glorious wealth effect, however, sales of homes ranging from $500,000 to $800,000, increased by 2.9% from a year ago, and sales of homes above $800,000 increased by 5.4%. In total, 35% of the homes sold for $500,000 or more. But combined sales, due to the collapse at the low end, dropped 14.3% from a year ago to 17,638, the worst March in six years, and the second-worst in nearly two decades.

“Southland home buying got off to a very slow start this year,” said DataQuick analyst Andrew LePage. Among the culprits: the suddenly absent large-scale investors, the jump in home prices, and the increase in mortgage rates [read.... Hot Air Hisses Out Of Housing Bubble 2.0: Even Two Middle-Class Incomes Aren’t Enough Anymore To Buy A Median Home].

And he put his finger on a new culprit: potential move-up buyers were stymied because they’d refinanced their current home at a “phenomenally low” interest rate. They can’t afford to abandon their relatively low payment, which they already stretched to reach, and buy a much more expensive home – a move-up home during a pandemic of inflated home prices financed at a higher mortgage rate. They’re trapped by the consequences of the Fed’s policies:

They could sell, but they can’t afford to buy!

“Lately on Saturdays and Sundays, you see open house signs everywhere,” Carey Chenoski, a real estate agent in Redlands, told the LA Times. “The houses that last spring would be gone in the first day are sitting maybe 60 days.” That’s at the low end. At the high end, at prime beachfront locations in Manhattan Beach, the wealth effect runs the show. Agents are getting “multiple offers on just about everything,” said Barry Sulpor, with Shorewood Realtors. “The market is really on fire.”

In the nine-county Bay Area, the median price paid for a home in March jumped  to $579,000, up a bubblelicious 23.2% from a year ago, the highest since December 2007, according to DataQuick. In my beloved San Francisco, the median price jumped 14.6% to $937,500. In Solano County, the “cheapest” county in the Bay Area, the median price soared 30.4% to $300,000.

Alas, sales plummeted 12.9% to 6,308 houses and condos in the Bay Area, the worst March since 2008, and the second-worst in the history of the data series going back to 1988. And the debacle was concentrated at the lower end: while sales of homes over $500,000 rose 5.2%, sales of those under $500,000 collapsed by 32.9%.

The same phenomenon is playing out across the nation.

Redfin, an electronic real-estate broker that covers 19 large metro areas around the country, saw year-over-year price gains of 9.9% in March, after 17 months in a row of double-digit gains. Las Vegas topped the list with an annual gain of 20.8%.

But home sales in these 19 markets dropped 11.6% year over year, the fifth month in a row of sales declines. Beyond California, where sales fell off a cliff, sales in Washington DC tumbled 13.5%, in Las Vegas 15.8%, and in Phoenix 17.3%. It's tough out there.

Some analysts, tired of looking silly blaming the weather, started blaming low inventories. So inventories were flat in the 19 markets overall compared to March last year; no reason for plunging sales. In Boston, Portland, and Austin inventories dropped. But in the cities where the sales plunge has been particularly nasty, inventories skyrocketed: up 41.9% in Phoenix, 28.9% in Ventura, 25.7% in Riverside, 24.8% in Los Angeles, 23.1% in Sacramento, 21.3% in San Diego.

And the number of new listings across the 19 markets rose by 6.3%, the first year-over-year growth in March in three years. The usual suspects in California saw the largest jump, with listings in Ventura up 13.1%. But they were up elsewhere too: in Long Island 12.7%, in Las Vegas 11.9%, in Chicago 10.6%, in Phoenix 7.8%, etc.

You get the idea: rising inventories, rising new listings, soaring prices, and plunging sales. Something has to give.

Unlike stocks, housing is subject to the real economy. When the price at the bottom half of the spectrum soars beyond what people can afford even with today’s still extraordinarily low interest rates, and beyond what makes sense for speculators that fix them up and rent them out, then demand stalls. Homes sit. Sellers get frustrated. People who need to move can’t move because they can’t sell their house for the price they want. People who want to move up can’t. Pressure builds. And eventually, the prices that the Fed conspired to inflate into the stratosphere, well.... This is like so 2006.

A report from the asset management and investment banking division of Groupe BPCE, the second largest bank in France, predicts what daredevil voices at the maligned margin of financial analysis have worried about for a while: another global financial panic. Read... What Happens When ‘All Assets Have Become Too Expensive?’

Categories: blogroll

Weibo Opens Way Below IPO Price

Zerohedge - Thu, 04/17/2014 - 10:03

Moments ago Weibo opened at a price that shocked pretty much everyone following the story of "China's Twitter", which had already cut overnight the number of shares it was taking public:

  • WEIBO CORP OPENS AT $16.27, IPO AT $17.00

However, within moments of opening the underwriters did everything they can to avoid another Facebook and defended the IPO price, promptly sending the stock above $17.00 where it was trading as of this second.

Will they succeed in keeping the most watched social network IPO of the week above its IPO price, or will the Chinese social networking craze also be Candy Crushed? The next few hours should give the answer.

Categories: blogroll

Obama To Provide More Non-Lethal Aid To Ukraine Such As Helmets And Sleeping Bags

Zerohedge - Thu, 04/17/2014 - 09:49

Moments ago, in a show of continued solidarity with the people of (West) Ukraine, US Defense Secretary Chuck Hagel announced the latest batch of "non-lethal" aid to Ukraine. Among the items that would be shipped are:

  • Sleeping mats;
  • Water purification systems;
  • Medial supplies; and of course
  • Helmets

What, no healthcare plans? Also, one wonders: is the procurement price billed to US taxpayers for every helmet shipped to Ukraine above $5,000 or above $10,000?

Hagel added that while US actions are "provocative" and "heighten tensions", the US supply of equipment to non-NATO member Ukraine is not meant to "provoke or threaten Russia" and will review providing Ukraine with more support, also saying that the US is offering "planners" to help NATO update plans. The same NATO which as we reported yesterday, is preparing to expand its air and water presence around Russia... also obviously in a way that is not meant to threaten provoke Russia.

And while the US is providing helmets and sleeping bags, Canada, which has a substantial Ukraine population, is also jumping in, this time by providing 6 F-18 Hornet fighter jets to the NATO "reassurance mission" in Poland:

BREAKING:Canada to contribute 6 CF 18s to NATO reassurance mission, they will be based in Poland + 20 officers to Nato Supreme Command (CBC)

— Just Hovens Greve (@JustHovensGreve) April 17, 2014

Or this:

This delivery of lethal "reassurance" support to a country in immediate proximity to Russia is surely also meant to neither threaten nor provoke Russia. That said, any response by Russia to this clear NATO escalation will promptly be branded as both threatening and provoactive. Stay tuned.

Categories: blogroll

Russia – What Do Sanctions Mean? How We are Playing

Emerging Money - Thu, 04/17/2014 - 09:20

As the US threatens to escalate sanctions, the question remains how effective sanctions can be, and what would be the scale of them. 


Red bridge quay in Moscow

I hosted a panel last week in NY with some of the most plugged in lawyers, US market players and deal makers in Russia, and here are some thoughts on the issue.

The first issue that must be addressed is how far is the US willing to go on sanctions.  It appears as if the EU cannot be as extreme as the US in their approach here with Russia much more integrated into the EU economy.  This has always been the negotiating element that Putin knew he held over the EU.  Russian gas and materials are fundamental to the European economy.  In terms of sanctions, by definition there are a couple different approaches that can be attacked but the core will be focused on cutting off Russian banks from international markets.  This will in turn choke off the private sector and can in fact be something that impacts Russia’s already fragile economic balance.

Meanwhile, as Putin laughs off sanctions (In Russia if you were a Duma member who had a visa revokes in round 1 of sanctions this was seen as the equivalent of a “political Oscar”), Iran is on record as saying they are surprised at how devastating the Iran sanctions were in their implementation.  The WSJ has an interesting article this AM citing government technocrats in Tehran saying that Russia should be more concerned than they have been about the potential effectiveness of sanctions against Russia.  Clearly many will say this is a politically biased story and one that reads as you would expect from the WSJ.  We think the storyline has merit.

In playing Russia stocks we believe there is an extended period of negative headlines that will confine the local MICEX index in a trading range.  We do, however, think that the price action of the last month offers some context for trading this market over the next month.  The lows of March 14 of 1237 on the index included an intraday move to the key 1200 level, which clearly held.  We think this  level which was the May 2010 level of support, the key resistance for the market on the way up in June and Sept of 2009, is where Russia is to be bought.  This blood in the streets moment (not literally) is a trading opportunity for investors.  Look at the moves in Russian stocks since March on an individual level.  Moves of 20-40% took place in Russian blue chips from that March 14th date to the trading highs. 

The MICEX is currently at 1328 this morning and 1300 is the most recent trading support line to review as tensions ebb and flow on a daily basis.  1200 or a move to 1225 and test of 1200 intraday is your line in the sand the brave take a shot at if we move lower in Russia.sg2014041738146


Categories: blogroll

And The Highest Returning "Asset" Class In CNBC's 25 Years Is...

Zerohedge - Thu, 04/17/2014 - 09:17

Today, in celebrating its 25th birthday, CNBC will have you know that stocks, which have generated returns of over 500% in the past 25 years, are the best asset because, well, "where else are you going to put your money." So if you said the S&P500 is the best performing "asset" class in the past 25 years you would be... wrong.

Categories: blogroll

Use the Russell 2000 as Your Guidepost As an Emerging Market Investor

Emerging Money - Thu, 04/17/2014 - 08:53

The attached chart of the Russell 2000 shows a breakdown that many have been calling for but has yet to really unfold.

Emerging_Markets_MapThe Russell 2000 Index (IWM, quote) encompasses US small cap stocks that often are much more sensitive to fund flows, sentiment changes, and of course, the fundamentals of the economy. 

Historically, Emerging Market investors have seen high correlation between the Russell and the Emerging Market equity landscape.

Much of that landscape in the last 18 months has been broken in an upswing for US stocks while EM has languished.  A breakdown, however, in the Russell will be a test for EM. 

Using the Russell Index as a hedging tool for your EM longs gives you higher beta coverage in a broader market selloff. 

Note:  No hedges are sure things and one of the dangers of long short investments is that both sides of a trade can work against you. 

If you were long EM and short the Russell on a 1yr basis, you would have lost 25%. We are looking for a breakdown in the Russell at the 200mda to be a signal broader selloff for this index which to this point has shown amazing resilience, but a rotation from growth to value currently underway must recognize the Russell trades at 62X current earnings vs 11.8X for the MSCI EM (EEM, quote).sg2014041736923

Categories: blogroll

Q1 Earnings Season Summary: More Than Half Have Missed Revenues

Zerohedge - Thu, 04/17/2014 - 08:51

When it comes to Q1 earnings expectations one thing is well known: they are low. Very low. So low in fact that as we showed earlier this week, Q1 earnings growth is now projected to be the lowest since Q3 2012, a dramatic change from EPS expectations at the start of the first quarter when it was optimism, all the way.


The reason for this collapse, as is well-known, is that after starting off the year on a massive euphoria binge and forecasting that this will be the year when growth finally takes off (after 5 years of false starts) companies quickly realized the economic growth is just not there, and whether one blames it on the weather, or on Russia, or - the real culprit - the sad state of the US consumer and thus, the Fed, it was time to greatly lower EPS forecasts.

Sure enough, this is what EPS expectations for Q1 looked like during Q1. A disaster:

So with the bar set so low, it is no surprise that most companies, or 65% of those reporting Q1 earnings so far, have beat EPS expectations (perhaps what is disturbing is that as much as a third have missed).

But what about revenues.

As it turns out, in their euphoria to lower EPS estimates, the sellside lemmings forgot all about revenues. This is confirmed by the chart below, showing that while EPS expectations were plunging, sales estimates were largely flat.


Because according to the Deutsche Bank Q1 earnings tracker, while two thirds may have beat earnings, a stunning 51%, or a majority of the reporting companies have missed Q1 revenue estimates.

That's ok: the top-line recovery will come in the second half of 2014. Or the third. Or the fourth. One thing is certain: by the 10th half of 2014, the economy will be in "escape velocity."

Just joking - as long as the Fed is around, and as long as it is more attractive for companies to buy back their own stocks and reward their "activist" shareholders instead of planning for long-term growth, and investing in Capex instead, there will be no revenue growth. Period.

Categories: blogroll

World War O

Zerohedge - Thu, 04/17/2014 - 08:46
Painting by Anthony Freda: www.AnthonyFreda.com


When George W. Bush unleashed unnecessary wars of aggression on Iraq and elsewhere, many writers dubbed it “World War W“.

Now, Obama is close to intentionally or unintentionally unleashing “World War O”.

Bush’s lying his way into an Iraq war and then using torture to try to justify it were war crimes.

But Iraq was a third-rate army … while Russia has nuclear weapons.   Even if such weapons of mass destruction are not unleashed, there could still be an unintentional nuclear catastrophe.

And China may not sit idly by while its close ally – and economic partner – is challenged.

World War O would be bad indeed.

Postscript: Hopefully, cooler heads will prevail.    But the Neocons are back (they never actually left), and the powers-that-be are desperate for a war to distract the population.  And the American media is banging on the war drums as loudly as it can.

Is U.S. Media Coverage of Ukraine and Syria Even WORSE than Its Coverage of Iraq?

Over the last year, we’ve documented that – despite all of the mea culpas for horrible Iraq coverage – the U.S. media’s coverage of Ukraine and Syria is just as biased, superficial and pro-war.

Former Associated Press and Newsweek reporter Robert Parry – who broke several of the biggest stories regarding Iran-Contra, and recipient of the George Polk Award for National Reporting in 1984 -  writes of U.S. media coverage of the conflict in Ukraine is even worse than Iraq:

In my four-plus decades in journalism, I have never seen a more thoroughly biased and misleading performance by the major U.S. news media. Even during the days of Ronald Reagan – when much of the government’s modern propaganda structure was created – there was more independence in major news outlets. There were media stampedes off the reality cliff during George H.W. Bush’s Persian Gulf War and George W. Bush’s Iraq War, both of which were marked by demonstrably false claims that were readily swallowed by the big U.S. news outlets.


But there is something utterly Orwellian in the current coverage of the Ukraine crisis, including accusing others of “propaganda” when their accounts – though surely not perfect – are much more honest and more accurate than what the U.S. press corps has been producing.


There’s also the added risk that this latest failure by the U.S. press corps is occurring on the border of Russia, a nuclear-armed state that – along with the United States – could exterminate all life on the planet. The biased U.S. news coverage is now feeding into political demands to send U.S. military aid to Ukraine’s coup regime.


The casualness of this propaganda – as it spreads across the U.S. media spectrum from Fox News to MSNBC, from the Washington Post to the New York Times – is not just wretched journalism but it is reckless malfeasance jeopardizing the lives of many Ukrainians and the future of the planet.

Media coverage of Syria is also  arguably worse than of Iraq.

After all, the American media trumpeted false claims about Saddam’s weapons of mass destruction.  But – with Syria – the American media is studiously ignoring the fact that:

Of course, the corporate media is always pro-war and pro-empire.  But now the large “alternative” media outlets – such as Drudge and Huffington Post – are also beating the war drums as loudly as they can.

So you’ll hear scary stories that terrorists in Syria are a threat to the U.S.  … but you won’t hear that the U.S. has been planning regime change in Syria for 20 years straight (and see this), or that the U.S. and its allies are the ones who pumped up those terrorists in the first place.

You’ll be told that Russia will start World War 3 if we don’t launch a military campaign in Ukraine … but you won’t hear that that the U.S. has planned on taking control of Ukraine since 1997, or that the former Ukrainian Security Chief alleges that the new neo-Nazi government was behind the sniper attacks which turned the West against the old regime in the first place.

You won’t hear any of that when the media is trying to sell a war …

Painting by Anthony Freda: www.AnthonyFreda.com

Categories: blogroll

The Richest Man In Asia Is Selling Everything In China

Advisor Analyst - Thu, 04/17/2014 - 08:25

by Simon Black of Sovereign Man blog,

Here’s a guy you want to bet on– Li Ka-Shing.

Li is reportedly the richest person in Asia with a net worth well in excess of $30 billion, much of which he made being a shrewd property investor.

Li Ka-Shing was investing in mainland China back in the early 90s, way back before it became the trendy thing to do. Now, Li wants out of China. All of it.

Since August of last year, he’s dumped billions of dollars worth of his Chinese holdings. The latest is the $928 million sale of the Pacific Place shopping center in Beijing– this deal was inked just days ago.

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Once the deal concludes, Li will no longer have any major property investments in mainland China.

This isn’t a person who became wealthy by being flippant and scared. So what does he see that nobody else seems to be paying much attention to?

Simple. China’s credit crunch.

After years of unprecedented monetary expansion that has put the economy in a precarious state, the Chinese government has been desperately trying to reign in credit growth.

The shadow banking system alone is now worth 84% of GDP according to an estimate by JP Morgan. The IMF pegs total private credit at 230% of GDP, jumping by 100% in the last few years.

Historically, growth rates of these proportions have nearly always been followed by severe financial crises. And Chinese leaders are doing their best to engineer a ‘soft landing’.

If they’re successful, the world will only see major drops in global growth, stocks, property, and commodity prices.

If they fail, the spillover could become pandemic.

This isn’t important just for Asian property tycoons like Li Ka-Shing. Even if you don’t know Guangzhou from Hangzhou from Quanzhou, there are implications for the entire world.

Here in Chile is a great example.

Chile is among the top copper producers worldwide, China among its top consumers. With a major slowdown in China, however, copper prices have dropped considerably.

Consequently, the Chilean economy has slowed. The peso is down nearly 10% against the US dollar in recent months, and the central bank is slashing rates trying to prop up growth.

There are similar situations playing out across the globe.

Not to mention, China could put the entire global financial system on its back just by dumping a portion of its Treasuries in order to defend the yuan.

Now, you’d think that a major credit crunch with far-reaching consequences in the world’s second largest economy, its largest manufacturer, and its largest holder of US dollar reserves, would be constant front-page news.

But it’s not.

Most traditional investors are unaware that what’s happening in China will likely have far greater implications to their investment portfolios than the policies of Janet Yellen and Barack Obama combined. At least for now.

And folks who don’t see this coming and keep buying at the all-time high may see their portfolios turned upside down. Quickly.

At the same time, some investors who are conservative and cashed up may realize a real ‘blood in the streets’ moment.

Again, using Chile as an example, I’m starting to see over-leveraged property owners coming to the market in droves ready to make a deal. This is great news because my shareholders and I are able to buy far more property with US dollars than we could even just six months ago.

I expect this trend to hold given that China is just at the beginning of its process.

It’s said that the Chinese word for “crisis” is a combination of “danger” and “opportunity”.

This isn’t entirely accurate. ‘Weiji’ can have several meanings, but is probably best translated as ‘dangerous’ and ‘crucial point’.

We may certainly be at that crucial point, and now might be a good time to take another look at your finances and consider selling before a major crash. The richest man in Asia certainly thinks so.

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Categories: blogroll

Has Inflation in the US Bottomed Out?

Advisor Analyst - Thu, 04/17/2014 - 08:19

by Sober Look

Some analysts are beginning to suggest that inflation in the Unites States may have bottomed. As discussed earlier this years (see post), US inflation indicators were pointing to the lowest rate since 2009. Are the global disinflationary pressures going to push the rate of price increases in the US to new lows or have we hit the bottom?

First of all, what is the market telling us? Market expectations of future inflation remain subdued, with the so-called breakeven (implied from TIPS) rates still near the 3-year low.

5-year breakeven rate (source: Ycharts)

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The situation with consumers is similar – inflation expectations remain low relative to historical data.

With expectations at the lows, why are some analysts calling the bottom on inflation in the US? Here are a few reasons:

1. Looks like producer prices are showing signs of life, as the latest PPI figure came in above expectations.

Source: Investing.com

The index has recently been changed to include a larger swath of the economy and it was those newer components which showed increases.

GS: – Headline producer prices rose 0.5% in March (vs. consensus +0.1%), while core prices rose 0.6% (vs. consensus +0.2%). The largest contributor to the unexpectedly large gain was trade margins—an implicit profit measure—which rose 1.4%. Within this category, there were large gains in flooring (+8.1%), chemicals (+4.7%), cleaning supplies (+4.0%), and apparel (+3.3%). The stronger March figures in this category followed a 1.0% decline in February, which pulled the core PPI down to -0.2%. The PPI for finished goods ex-food and energy—the “old” core PPI—rose a more typical 0.1%, consistent with subdued pipeline inflation.

Nevertheless this increase got some people thinking.

2. Today’s CPI increase was also firmer than expected (see story), a great deal of which was due to rising costs of shelter and food (not great for the US consumer).

3. In spite of the weakness in some commodity prices driven by China’s slowdown (see post), commodity indices are generally off the lows.

DJ UBS Commodity Index

CRB BLS Spot Commodity Index (source: Barchart)

In particular, the energy sector rallied recently, with both gasoline and natural gas prices on the rise.

4. Some senior Fed officials are beginning to talk about inflation bottoming out (could of course be wishful thinking).

James Bullard: – “One thing you can say is that while inflation has drifted down … it kind of bottomed out in the past nine months, and I think it’s poised to go higher, back towards our target”

Given the data thus far, it’s difficult to make a reasonable projection at this point. With low inflation priced in however, any turnaround will
take the markets by surprise.

Copyright © SoberLook.com

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Technical Weekly: NASDAQ Short and Long Term Perspective

Advisor Analyst - Thu, 04/17/2014 - 08:12

by SIACharts.com

For this week’s edition of the Equity Leaders Weekly, we are going to review the Nasdaq Composite Index on both a shorter term and a longer term perspective given its recent volatility.  Last week, there were several commentaries in the news stating “the collapse in the Nasdaq continues” and that investors are very fearful about the markets again after its third weekly drop.  Let’s take a closer look and review what has happened.

Nasdaq Composite Index (NASD.I) (1% chart)

Looking at the Nasdaq Composite Index on the 1% chart we see it hit resistance at 4362.48 and has corrected about 7% since reaching this multi-year high.  However, rather than this being a “collapse” in the Nasdaq, this would still be considered a correction within this current uptrend until the market tells us otherwise.  What has scared many investors is that before 2014 the Nasdaq didn’t experience a correction of more than 5% since late 2012, and yet in 2014 it has now experienced 2 corrections of 5% or more.  Drilling down even further, as of Apr.14, 2014 there were 17 stocks within the Nasdaq Composite that were down more than -10% over 1 month.  And 11 of these 17 stocks were in the Internet and Drugs sector.  Clearly, Internet and Drugs stocks were experiencing the most pain.  Furthermore, the average return for these combined 17 stocks in 2013 was a staggering +113%.  So the stocks that had some of the best returns in 2013 were now experiencing some of the biggest drawdowns so far in 2014.  It remains to be seen if this results in a much larger correction for the broader markets but for now it looks like some of the froth is being taken off some of the high flying stocks of last year.

Click on Image to Enlarge


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Nasdaq Composite Index (NASD.I) (2% chart)

Now let’s examine the Nasdaq Composite Index on a longer term perspective using a 2% chart.  Before this week, the Nasdaq had not experienced a 3 box reversal on a 2% chart since Nov.2012.  So not surprising it was due for a correction.  Comparing this current correction to its previous corrections we see that the last significant correction on the Nasdaq was in June & Nov 2012 where the index experienced two 10% corrections in that year.  Prior to that in 2011, the Nasdaq went through an 18% correction in August followed by a 10% correction in November.  And in 2010, the Nasdaq had an 18% correction that occurred over 2 volatile months.  So to put this current 7% correction (as of Apr.14) in perspective the Nasdaq has experienced multiple correction periods from its bear market low in 2008-2009.  And the only year since its low in 2008-2009 that the Nasdaq didn’t experience a correction of 10% or more was in 2013.  So 4 out of the last 5 years saw at least one 10% correction.  So if the current market volatility has you scared, just remember the market has been here before and at the time of this writing is undergoing a much needed breather.  Support is currently sitting at 3975.91 and should this weakness continue, its next support level is at 3746.58.  To the upside, resistance is now at 4389.72 on a 2% chart.  This will be an important level for the Nasdaq to break through if it is going to continue its current uptrend.  As always, we continue to monitor the supply/demand characteristics of the markets and adapt our stance when necessary.

Click on Image to Enlarge


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Philly Fed Surges To 7-Month Highs As "Hope" Crashes To 1-Year Low

Zerohedge - Thu, 04/17/2014 - 08:09

The Philly Fed Business Outlook survey surged to 16.6, beating expectations by the most since September and rising to 7-month highs. Most subindices rose with shipments surging and new orders rising but prices paid flat. The big worry though is that this six-month forward expectations collapsed to their lowest since April 2013. So the pent-up-weather-demand is being seen as entirely unsustainable by the survey respondents...



Full table:

From the report:

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of 9.0 in March to 16.6 this month, its highest reading since last September (see Chart).  The index has now increased for two consecutive months, following the weather?influenced negative reading in February. The new orders and current shipments indexes also moved higher this month, increasing 9 points and 17 points, respectively.


Indicators suggest slightly improved labor market conditions this month.  The employment index remained positive for the 10th consecutive month and increased 5 points, suggesting overall improvement. The percentage of firms reporting increases in employment (20 percent) edged out the percentage reporting decreases (13 percent).  The workweek index was also positive for the second consecutive month, edging 2 points higher.


Price Pressures Are Relatively Moderate


The survey’s price diffusion indexes continue to suggest overall moderate rates of increase.  The prices received index was unchanged at 4.3.  Nearly 76 percent of the firms reported no change in their final goods prices, and the percentage of firms reporting increases (13 percent) was only slightly greater than the percentage reporting decreases (9 percent).  The prices paid index edged slightly lower, to 11.3, its third consecutive month of decline.  Seventeen percent of the firms reported higher input prices, down from 19 percent in March. 

More notably, here is the comment on the only negative in today's report: the forward expectations which "inexplicably" tumbled:

Firms remain optimistic about the growth of overall manufacturing activity for the next six months. The future general activity index remained positive; however, the index decreased nearly 9 points from its reading in March (see Chart).  Indexes for future new orders and shipments also edged lower. The future new orders index decreased 3 points, while the future shipments index decreased 8 points.  Firms’ responses about future employment continued to reflect overall confidence about future conditions. The percentage of firms expecting employment growth (27 percent) was greater than the percentage expecting employment declines (11 percent).  The index, however, decreased 13 points, exactly reversing a 13?point increase in March

Finally, in a special question, respondent firms were asked why they remain in the Philly region. Here is what they listed as their primary reasons:

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MERCK & CO NEW (MRK) NYSE – Apr 17, 2014

Advisor Analyst - Thu, 04/17/2014 - 08:06

SIA Charts Daily Stock Report (siacharts.com)

The SIA Daily Stock Report utilizes a proven strategy of uncovering outperforming and underperforming stocks from our marquee equity reports; the S&P/TSX 60, S&P/TSX Completion and S&P/TSX Small cap We overlay these powerful reports with our extensive knowledge of point and figure and candlestick chart signals, along with other western-style technical indicators to identity stocks as they breakout or breakdown. In doing so we provide our Elite-Pro Subscribers with truly independent coverage of the Canadian stock market with specific buy and sell trigger points.

Note: Subscribers can screen all Canadian and U.S. stocks and mutual funds, or as components of equally weighted mutual fund sectors indices, and fund groups by issuer (eg. AGF, Dynamic, Franklin Templeton), all Canadian Exchange Traded Fund, and Funds by issuer (iShares, Horizons, BMO) or as components of Equally Weighted Fund Sector Indices (e.g. 2020+ Target date, Cdn Equity Lg Cap), and create and monitor their own, or SIA’s existing model portfolios. Finally, subscribers benefit from being able to generate BUY-WATCH-SELL Signals on demand with SIA Charts proprietary Favoured/Neutral/Unfavoured, SMAX scoring algorithm (see green-yellow-red graph 1 below).

MERCK & CO NEW (MRK) NYSE – Apr 17, 2014

GREEN – Favoured / Buy Zone
YELLOW – Neutral / Hold Zone
RED – Unfavoured / Sell / Avoid Zone

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MERCK & CO NEW (MRK) NYSE – Apr 17, 2014




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When Bloat Becomes a Problem for Fund Managers

Advisor Analyst - Thu, 04/17/2014 - 08:03

by Research Puzzle

In the latest issue of Morningstar magazine, Russel Kinnel authored an article entitled, “How Bloated is Your Manager?”  (It is apparently not online at this time.)  As he wrote, “Asset bloat can weigh down a fund, making it less nimble.”

A related question was recently asked of the Wall Street Journal Experts:  “Are there investment strategies that no longer work, because too much money has flowed into them?”  (My response.)

Bloat can definitely be a problem for a fund, for an organization, or for a strategy that has gotten too popular throughout the market.  The opportunity set cannot accommodate unlimited size.  So, when does size become a problem?  That is a key question for investors.  (There are also advantages to size; I explored some of the issues in a 2010 piece on how size matters.)

Kinnel had used what he calls “the bloat ratio” more than a decade earlier and returned to it in the article.  He noted that the worth of the ratio as an assessment tool seems to vary by market regime — like most things.  It would also be interesting to overlay the flows into and out of the funds in making judgments.  Just think of the famous Janus example among others:  When there were strong flows in, the purchases were supportive despite the bloat — a virtuous cycle — but when the flows reversed, the bloat was crushing.

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The ratio “multiplies turnover by the average day’s trading volume of a fund’s holdings (asset-weighted).”  Kinnel says “it’s not something to put at the top of your manager-selection criteria,” but thinks it can be helpful.  He gives a variety of examples of funds with low and high levels of bloat, at least as measured by his ratio.

The one pictured above is Neuberger Berman Genesis (NBGNX).  While it has low turnover, when you’re pushing $14 billion around in “rather small names,” the size can be an issue.  The fund is shown from the 2009 bottom and you can see that it has underperformed the Russell 2000 (shown here via its ETF, IWM) over that time, although it had outperformed it previously.

Has the fund lagged for that reason?  I have no idea, nor do I know whether Kinnel’s ratio is a good one.  But you’d better be asking the question for any fund, rather than just buying on past performance.  (Chart:  Bloomberg terminal.)

Do you have your copy of Letters to a Young Analyst yet?

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If You Know Where the 10-Year is Going …

Advisor Analyst - Thu, 04/17/2014 - 07:56

by Market Anthropology

A simple question deserves a simple answer.

Are 10-year yields headed higher or lower through the balance of this year?

  • If you believe long-term interest rates are headed higher, sell precious metals and the broader commodity complex and buy the dip in equities – especially the banks.
  • If you believe long-term interest rates are headed lower, sell the banks and the SPX and buy the dip in commodities – especially precious metals.

Our chorused refrain throughout 2014 has been that 10-year yields became stretched to a relative extreme last year – despite their low disposition – and were poised to retrace.

As the precious metals sector takes it on the chin on yet another tax day, we urge participants to appraise the bigger picture. While the equity markets should bounce over the short term, we expect they will once again roll-over with long-term interest rates.

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Click to enlarge images

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Ukraine Bars Entry To Russian Men Aged 16-60

Zerohedge - Thu, 04/17/2014 - 07:53

In a somewhat stunning turn of events, entry to Ukraine is being dramatically restricted to Russian men. Interfax reports, Ukraine border service officials "significantly restricting" entry of adult males from Russia.


Aeroflot notes on their website that entry will be denied to "all citizens of Russia male aged 16 to 60 years" and "citizens of Ukraine who are registered in Crimea."

Via Aeroflot,

Aeroflot informs passengers about the severe restrictions imposed by the Ukrainian authorities to enter the country. According to the official announcement, the airline received in crossing the state border of Ukraine will be denied:

1. All citizens of Russia male aged 16 to 60 years .

Skipping this category will be on the decision of the head of the regional administration (border detachment) after control only in cases of emergency when available: documents confirming kinship, death or serious illness of close relatives certified originals invitations businesses and individuals on the basis of awareness or directed by the Administration of State Border Service .

Without supporting documents will be allowed entry only to citizens of the Russian Federation, who follow families with children.

2. Citizens of Ukraine males aged 16 to 60 years who are registered on the territory of the Autonomous Republic of Crimea and the city of Sevastopol .

Skipping this category of persons will be implemented to address the chief border guard unit only if you follow the funeral of a close relative, the availability of documents the serious illness of a close relative, plane tickets, travel vouchers or pursuant to inform the authorities of the State Border Service.

Citizens of Ukraine females aged 20 to 35 years who are registered on the territory of the Autonomous Republic of Crimea and Sevastopol city will be skipped on the territory of Ukraine only on the results of the filtration and verification activities.

These restrictions do not apply to flight and cabin crew, as well as engineering and technical personnel of the airline.

Aeroflot recommends passengers who belong to the above categories, temporarily refrain from trips to Ukraine.

Return flight directions: Moscow - Kiev, Moscow - Kiev, Moscow - Donetsk, Moscow - Kharkov, Moscow - Odessa will be no penalties.

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Commodities Do Not All Move in Lockstep

Advisor Analyst - Thu, 04/17/2014 - 07:50


One of the big themes for us this year has been to stay on the long side of the Commodities market . Coming into 2014, stocks were generally an asset class that we wanted to avoid on an absolute basis, but since commodities had essentially become the forgotten asset class, we felt it was where we preferred to be.

Now, within that commodities space, the strength has really come from the agricultural names rather than the base metals. Look at the chart below that shows the year-to-date performance of the Ags vs the Base metals:

4-16-14 dba vs dbb

This is a fascinating development that points us towards the demand for agricultural names. Call it a coincidence perhaps, but the Agribusiness ETF is setting up very nicely as well.

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Take a look at the weekly chart of $MOO where we can see a steady series of higher lows since 2010. Meanwhile, prices continue to bump up against this overhead supply. The more times that a level is tested, the higher the likelihood that it breaks:

4-16-14 MOO weekly

If you look a little bit closer, we can see some interesting developments in the short-term as well. First we have a nice clean downtrend line from the highs last January. Earlier this year we had a temporary breakdown back below that downtrend line. Do you see how quickly it recovered to head back up towards this $54.50 resistance?

4-16-14 MOO daily

I love it when longs get stopped and then have to get back in. This is how some of my favorite squeezes develop. We’re looking for a breakout above this key level as a signal that the sellers have dried up.

The Agribusiness names probably stand out the most on a relative basis. Here is a chart showing the MOO/SPY spread getting crushed all of last year. But with momentum already putting in higher lows, we are now waiting for a bullish divergence confirmation. In my opinion, we have this once we’re above 293.

4-16-14 MOO vs spy

I’m still a big fan of our investing themes for this year. We’re sticking with commodities, sticking with bonds, and trying to stay away from stocks. I think there are some individual less correlated names that can do well, but for the most part I’d rather own stocks on a relative basis.

The Agribusiness space is one area that definitely stands out. Plus, it fits right in to our bullish thesis about commodities. Here are some the biggest holdings for the ETF broken down by percentage of the fund:

4-16-14 MOO holdings


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