What We're Reading

Macro (117)

Admin

Sadly Consumers (and Wall Street) Haven't Learned

Americans lust for things they cannot afford continues as credit usage has rebounded since the height of the credit crisis however, with the Fed's current zero interest rate policy (ZIRP), the ongoing use of credit is not necessarily a thing for concern.

After all, if you were able to refinance your home from 6% down to 3%, that's a good thing, right?  Ditto for your credit cards which may have been 9.9% prior to 2008 and now down at much lower levels.  Indeed ZIRP has aided corporations and individuals to grab historic, once-in-a-lifetime opportunities to restructure existing debt and issue new debt for acquisitions for almost nothing.

In that respect, I guess Obama's statement "we're much better off than we were" would ring true here.

What does bother…

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Admin

Stock Buybacks; Sustainable Smoke And Mirrors

My simplistic view of the stock market, the one my muddled brain is able to wrap around, is to imagine that of the waterfalls at the Continental Divide at Glacier National Park in Montana.  Numerous rivers, all converging into to one.  Hedge funds, pension funds, investment firms, your own 401k, option flows, you name it.........and share buybacks.

Throughout the recovery, the amount of cash being held on corporate balance sheets was in some instances, astounding, leaving many investors wondering if/when the cash would be deployed. 

Well if you haven't noticed, they have been deploying more and more.  Just imagine the many streams you see in this image to the right.  One is M&A which can be the acquisition of a company to compliment ones existing…

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Admin

Pretty much as I had expected.  Consumers are tapped out and you can blame inflation the Fed says doesn't exist the necessities, food and gasoline.  Certainly the packages have become small to mask the cost but we all know it's there, lurking.  We're getting less and less for our hard earned buck and $20 just doesn't buy what it used to....leaving less for dining out, electronics, clothing, vacations, etc.  

Retailers beginning to feel the pinch may shift to more coupons, clearance sales, preferred customer discounts.  Others will continue to tighten the belt internally moving more to cloud, temp agencies for personnel (a huge cost savings) and other cost-cutting measures.  Insurers for example have discovered that making …

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Admin

Wage Hike Ahead? Small Business Survey Suggests Yes

A view of the the NFIB survey and wage growth gives a hint of what may lie ahead in the wage sector.  Consumer spending dropped $7 in June which surprised many. 

(CLICK ON IMAGES TO ENLARGE)

While Americans' spending in June was generally on par or lower than their average May spending, this month's $7 drop is one of the largest recorded by Gallup during this time of year since 2008, when June spending fell by $10. The June 2008 spending average of $104 is still the highest average for that month in Gallup's six-year trend.

Can it be the new jobs being created (majority at the low end) is weighing on consumers pocketbook?  #shocker!  But what about the spending of the wealthy lifting all boats?  You know; that good old trickle down…

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Admin

The Bond Markets Pessimism Is Vindicated

I've been a close observer of the bond market for over 25 years, and it continues to amaze me with its ability to see the future of inflation and real economic growth. 
I've been featuring the above chart for a long time, using it to argue that the market was quite pessimistic about the prospects for economic growth. My theory is that real interest rates ought to track the market's expectations for real growth, and indeed they have. Real growth and growth expectations were very strong in the late 1990s, and real yields on TIPS were very high. Since then, the economy has slowed down and real yields have fallen. 5-yr real yields on TIPS have…

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Admin

SPX And Recessions

Given today's big GPS miss (-2.9% vs. expected -1.8%), I felt we should take a look at the historical performance of the S&P500 when it comes to recessions.  For all of those who harp that the stock market is not the economy, past reactions to recessions is certainly interesting.

Click image to enlarge.

Chart courtesy of ElliottWaveAnalytics

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Admin

Small Robots Building Large Structures

As highlighted here previously, China is clearly not the only country exploring the wonderful world of 3D printing and it's application to housing.  Sadly the loser will be the average construction worker.

The Institute for Advanced Architecture of Catalonia in Barcelona is working on a set of robots that will soon be able to build complex structures by extruding layers of concrete, a process that might be a bit slow but that will…

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Admin

Where The Jobs Are 5 Years Into The Recovery

Five years since the end of the Great Recession, the economy has finally regained the nine million jobs it lost. But not all industries recovered equally.  This awesome interactive from the NYTimes demonstrates what's moving and what is not along with over 200 charts drilling it down in simple terms.  Tell your high school and college attendees.  Are they in these growth areas?   Click chart to make the jump to the interactive.

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Admin

Steer Clear Of European Rivers And Lakes

The most dangerous, widely found chemicals were pesticides, polycyclic aromatic hydrocarbons from burning petroleum or organic matter, brominated flame retardants often used in consumer products, and tributyltin, an internationally banned anti-fouling paint ingredient that leaches from boat hulls.

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Admin

World Bank Cuts Outlook But There's Always A 'But'

Here we go again but should anyone be surprised?  This is one of those days when people will come out and say "the market is not the economy" yet we all know job growth remains tepid at best and with that, one has to ask "where will the growth come from?"  See the ginormous infographic below.

World Bank has lowered its forecasts for developing countries, now eyeing growth at 4.8 percent this year, down from its January estimate of 5.3 percent. Signs point to strengthening in 2015 and 2016 to 5.4 and 5.5 percent, respectively. China is expected to grow by 7.6 percent this year, but this will depend on the success of rebalancing efforts. If a hard landing occurs, the reverberations across Asia would be widely felt.

There's always a BUT

Yet …

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Admin

EU To Investigate Offshore Corporate Tax Havens

Being reported in the Wall Street Journal, the EU to Investigate Corporate Tax Codes in Ireland, Luxembourg, Netherlands after criticism of their tax rates for Corporate offshore havens.  AAPL specifically being mentioned in the news as theirs use of favorable Irish tax laws allowed it to pay just a 3.7% tax rate on non-U.S. income during its last fiscal year. That, in turn, is a big reason $132.2B of Apple's $150.6B  cash balance at the end of FQ2 was offshore.  Tim Cook was grilled by Congress last year over Apple's offshore tax payments;…

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Admin

10 Basic Laws of Economics

Jeffrey Dorfman's recent column in Forbes ("10 Essential Truths Liberals Need to Learn") is not a partisan attack on liberals. It is a clear-cut summary of some basic laws of economics that hold no matter what your political beliefs happen to be. Unfortunately, too many Republicans, Democrats, and bureaucrats are guilty of ignoring these laws. In my experience, it's also true that too many investors fail to understand these fundamental truths. I've only listed the laws here; for an explanation of each be sure to read the whole thing: (HT:…

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Admin
The investigation is looking into whether single cargoes of metal were used multiple times to obtain financing, according to industry sources. Trading houses and banks have sent executives to the port to physically check on their exposure, while some banks have stopped new metal financing to some clients in China. Traders said holders of copper in Qingdao that were having difficulty obtaining finance could also be forced to deliver

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Admin

The Draghi Squeeze

Sectors are squeezing higher in anticipation of ECB rate decision, expected to cut rates another 25-50bp (negative rates - wow) and possibly announcing LTRO (long-term refinancing operations) tomorrow before U.S. markets open in an effort to reign in inflationary pressures across the pond. I would assume much of this has been "baked in" however $1941 remains very doable.
One thing for certain if they don't, it will be ugly........but I'll still buy the dip.

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Admin

Trade War Brewing With China

From a chart point of view, there's a definite divergence in performance in U.S. solar stocks vs. their Chinese competitors.   Forget the cold war; is a trade war heating up with China?  Charts don't lie - people do.  Full disclosure StockBuz recommended long FSLR in 2013.

The United States slapped new import duties on solar panels and other related products from China on Tuesday after the Commerce department ruled they were produced using Chinese government subsidies, potentially inflaming trade tensions between the two countries.

The U.S. arm of German solar manufacturer SolarWorld AG filed a petition…

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Admin

Fed To Regulate Insurers?

Moves today in AIG and MET to name a few may be based on speculation whether the Fed will move to regulate some insurers as "systemically important" which was previously discussed in this article on asset managers.  Under Dodd-Frank, the Financial Stability Oversight Council, a newly created super-regulator, can designate “systemically important financial institutions,” or SIFIs, and subject them to rules previously reserved for banks.  Steve Miller, AIG non-executive Chairman shares his view on CNBC.  Full disclosure StockBuz has previously recommended AIG…

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Admin

BDI Shipping Index Update

The chart says it all.  I will be adding to my shipping drawer stock $NAT here.  Maybe the shipping index truly has been an indicator of true global (low) demand coupled with an oversupply of ships and heavy debt but charts do not lie.  People do.  Funds should be adding to their positions down at this test of prior breakout support.  We may build a long base, which is healthy.  Add at the lows.  I will still hold my (alert) stop comfortably below the 2012 low (not by a few pennies either).  They may even try to shake out weak hands by taking out that low before reversing however I'm undaunted.  Come on, bring it.  I'll buy more at these prices as global economies begin to heal and M&A should pick up in this beaten up sector.…

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Variant Warns: Profit Margins To Head Lower

While the continual question remains, why are bonds holding up?  Why isn't that money flowing into equities?  We highly recommend recommend this piece from Variant Perceptions.  These gusy have nailed it over and over again in the past and maybe, just maybe big investors are embracing something that the little guy doesn't wish to accept.  That profit margins in our "new recovery" are unsustainable.  We may crawl higher, but they wouldn't bet the bank it will last long.  That's great!  I'd prefer reverting to the mean and loading up on names..........at lower levels.  Enjoy-

Profit margins in the US have hit modern-day record levels, and this has been used to help justify high equity valuations. Consensus estimates are for profit margins to remain steady, or even increase from current levels. We disagree for ironclad economic and accounting realities, and think margins will fall, taking equities down too.

Profit margins have, at least until now, exhibited…

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Admin

Job Search: 47% Have Completely Given Up

Not all Americans are enjoying the slow economic rebound. A poll found that about half of unemployed workers say they have given up looking for a job.

A Harris poll on behalf of Express Employment Professionals conducted last month found that 47% of such workers say they have "completely given up looking for work." The survey of 1,500 unemployed adult Americans also found that 82% of those who receive unemployment compensation say they would look harder for a job if those payments ran out. The other 18% agreed with the statement that they would be in such despair, they would give up looking for work altogether.

Among other findings, the survey also revealed that 60% of respondents feel that…

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