Posts by Alex Rosenberg
Wal-Mart has announced that it will raise its lowest wages to $9 in April and $10 by February 2016, well above the national minimum wage or $7.25. The move has been widely hailed as a salve for the poorest working Americans, and a potential benefit to the American economy insofar as it will pressure other companies to raise wages and therefore spur consumer spending.
But Peter Schiff, the CEO Euro Pacific Capital, says the move has a darker side.
“Ultimately, it’s going to cause Wal-Mart to cut back on hiring,” he said. “I mean, if it has to pay higher wages, it may decide just to have fewer job opportunities.”
“When Wal-Mart has a job opening, they get inundated with applicants,” Schiff added. “I mean, this is going to make it even harder to get a job at Wal-Mart. Because if people were lining up for Wal-Mart jobs before, they’re obviously a lot more attractive now at these higher wages.”
But that’s not the only potential harm to lower-income Americans that could come from this move, according to Schiff, who has long defended Wal-Mart against pressure for the world’s largest retailer to raise its minimum wage.
Finally, Schiff notes a third potential negative ramification.
Alex Rosenberg at CNBC 3 mths ago
Nobel Prize-winning economist Robert Shiller has a grim message for investors: Save up, because in the years ahead, assets aren't going to give you the type of returns that you've become accustomed to. In his third edition of "Irrational Exuberance," which will drop later this month, the Yale professor of economics warns about high prices for stocks and bonds alike. "Don't use your usual assumptions about returns going forward." Shiller recommended to investors in a Thursday interview on CNBC's " Futures Now ." He says that stock valuations look rich. In fact, Shiller's favorite valuation measure, the cyclically adjusted price-earnings ratio (which compares current prices to the prior 10 years' worth of earnings) is "higher than ever before except for the times around 1929, 2000, and 2008, all major market peaks," he writes in his new preface to the third edition. "It's very hard to predict turning points in markets," Shiller said on Thursday. His CAPE measure of the S&P 500 (CME:Index and Options Market: .INX) "could keep going up. ... But it's definitely high. By historical standards, it's up there." Meanwhile, Shiller said that bond yields, which move inversely to prices, "can't keep trending down" and "could [reach] a major turning point in coming years." It's no surprise, then, that Shiller expects little in the way of asset returns-meaning Americans will have to rely more heavily on the piggy bank.
Apple just announced a huge deal with First Solar, which sent shares of the solar company soaring. But that doesn’t mean that the stock, which has lost a third of its value over the last five months, is a good buy right now.
First Solar rose significantly higher on Tuesday after Apple announced a deal to buy $850 million worth of solar power from a First Solar plant, and the bounce was sustained on Wednesday. More light will be shed on the company on Feb. 24, when First Solar is slated to report earnings.
And that could have a profound impact on the shares.
First Solar is “implying a very, very big move on earnings. It’s implying a $6 move, which is about 12 percent,” reported Andrew Keene of Keene on the Market.
But that doesn’t mean that the bulls should get excited.
“If we look at, historically, how the stock has performed on earnings, it has sold off six of the last eight quarters,” Keene said. “So if I was in First Solar, which I am not, I would be looking to take profits here because I think it can test back to the $42 level.”
Interestingly, Todd Gordon’s technical work similarly suggests that “$42/$43 is significant” for the stock, which closed slightly below $49 on Wednesday.
Crude oil has staged a bit of a rebound, notching a nearly 10 percent gain over the past week, even after falling sharply on Wednesday. But energy stocks, as represented by the SPDR Energy Select ETF (XLE) are up just 5 percent over the same timeframe.
So are energy stocks doubting the oil bounce?
According to David Seaburg, head of sales trading at the Cowen Group, the dynamic is actually a bit more complicated.
Crude oil “underperformed to the downside versus the XLE, and you should expect the same on the upside,” he said.
After all, “ the impact of price is not the same for every company,” with moves in oil impacting some energy companies more than other.
Interestingly, that could actually provide an opportunity for traders to get into the energy ETF, says Stacey Gilbert, a senior options trader with Susquehanna.
"There is substantial money moving into the XLE saying, ‘I don’t want to just have exposure to crude, I want to have exposure to oil companies that have sold off that could benefit from a stabilized crude market,’ which is what we’re seeing,” Gilbert said.
Disclosure: Gilbert’s firm, Susquehanna, is a market maker in several energy stocks.
Stocks are famously valued based on the expected stream of the companies’ future earnings. And that’s just what makes the latest earnings season trend so odd.
All of the sudden, corporate results appear to have taken a supporting role when it comes to the market moves, according to one market participant.
“I don’t think there’s a lot of baked-in big expectations for earnings right now,” said David Seaburg, head of sales trading at Cowen. “If you look at the options market and the individual stocks that are due to report, the [average expected] move on earnings is a lot less than it’s been in prior quarters.”
So if not earnings, what is moving equities now?
“It’s macro, it’s geopolitical, it’s what’s going on in Greece that is taking center stage,” Seaburg said, referring to Sunday’s Greek election. Other recent macro events have included the announcement of European quantitative easing and the continued plunge in crude oil prices.
Earnings expectations “are kind of muted now. I think we need to see some of the political stuff get out of the way and see some of the economic things within Europe change for the better for this market to really pick up pace,” Seaburg said.
Alex Rosenberg at CNBC 5 mths ago
McDonald's (MCD) shares are rallying on a rumor that Bill Ackman is taking a stake in the company, and pushing for the fast food giant to spin properties off into a tax-efficient real estate investment trust.
The stock is up 3 percent in two days on the chatter. In addition to the stock, bullish call options are hot. On Tuesday, the most popular option was the December 90-strike calls (which expire on Friday), which traded at an average price or $0.54. In order for these bets to pay off, the Dow component would need to finish the week above $90.54, or 2 percent above Tuesday's close.
"Obviously traders are getting in on the rumor, looking to play the momentum," Dan Nathan of RiskReversal.com said Tuesday on CNBC's "Fast Money." But "I don't really put a lot of merit into it.... If this rumor doesn't pan out, I would expect to see some selling."
When he was asked directly about the chatter on Bloomberg Television, Ackman said he couldn't comment.
However, some market participants appeared to take that response as a tacit confirmation, leading the stock to rise swiftly on Wednesday morning.
Follow the show on Twitter: @OptionsAction .
Alex Rosenberg at Talking Numbers 5 mths ago
New York City real estate: The world’s ‘ultimate safe haven’
It used to be said that the streets of New York are paved with gold. Actually, for those desperate to preserve their wealth, New York City is filled with something a lot more useful: luxury real estate.
The Russian ruble has been battered by plunging crude oil prices and geopolitical concerns, with the currency losing more than half of its value against the dollar this year. And as for the common safe haven move of owning gold, we have learned over the past few years that bullion can lose value as rapidly as it gains it. This leaves pricey Manhattan real estate as one of the few places where Russian millionaires and billionaires feel comfortable parking money.
“We see a lot of inflows of foreign money coming to New York, especially from places like Russia and China,” said Tamir Shemesh, associate broker at the Corcoran Group. “They know this is the safest place for their investments.”
Of course, Russian billionaires have a lot of choices when it comes to where they invest. But a confluence of factors conspires to make the Manhattan real estate market tops for nervous global investors.
The 10-year yield plunged Wednesday, falling below 2.4 percent. Often, low Treasury yields are taken as indication that inflation will remain low and that tough economic times may be ahead. But in this case, traders say that U.S. yields are merely following a global trend.
In Germany, which has the strongest economy in Europe and is one of the world’s most important markets, yields on the 10-year government Bund have fallen below 0.9 percent. This continues the huge decline in German rates, which started 2014 near 2.0 percent.
For Erin Gibbs of S&P Capital IQ, U.S. 10-year yields are “fair.” And while 2.4 percent might not sound like much, she points out that Treasurys “are just so much more attractive than everything else."
The European Central Bank kept its rates unchanged Thursday. However, given that the German economy has disappointed, and the ECB looks primed to embark on further easing measures, “There definitely is going to be a preference for the U.S. asset class, both in fixed income as well as in equities, for the next six months,” she said.
Richard Ross of Auerbach Grayson agrees that U.S. yields are at a sensible level.
Stocks have run into a bi t of trouble lately, sliding more than 2 percent off recent record highs. And over the course of September, the CBOE Volatility Index, sometimes known as the market “fear index,” has risen 36 percent. However, technical and fundamental indications could be pointing to further upside for the VIX, which could also lead to further pain for investors.
Ari Wald, head of technical analysis at Oppenheimer, says a rising VIX actually tend to be a signal to buy stocks. The problem, he says, is that the VIX hasn’t risen quite high enough yet.
(Watch: S&P 500, Nasdaq extend quarterly win streak to seven)
“Your opportunities are when you see these VIX spike in an uptrend, and looking at the VIX, it’s currently about 16. We would look at an area around 18 to 20 as a good opportunity to buy stocks. We’re not there yet.”
On the contrary, “there could be one more near-term setback in the S&P 500,” he said.
Gina Sanchez of Chantico Global is also looking for a decline.
“We’re looking for a drop in the S&P, and that’s something we haven’t really seen,” even with a rising VIX. But “I do think that we are due for the S&P to cool off at some point.”
Massive pro-democracy protests in Hong Kong have captured the world’s attention—and created a new geopolitical concern for the markets. The city’s Hang Seng index dropped nearly 2 percent on Monday to a two-month low. And according to some Wall Street experts, it could get much worse for Hong Kong stocks in the weeks ahead.
The civil protests are “affecting the Hang Seng already, and it will probably continue to do so for a while,” said Gina Sanchez of Chantico Global.
Protesters in the former British colony, now a major center of global finance, are taking issue with Chinese interference in Hong Kong elections. At this point, the biggest concern for Beijing is assumed to be a broader push for democracy in mainland China. Within Hong Kong, the Chinese government has been warned by the United States to exercise restraint in dealing with protesters.
When it comes to the chart, Richard Ross of Auerbach Grayson says the Hang Seng is at a critical level.