Treasury curve the flattest since 2/09 at 158 basis points comparing the 5yr (1.68%) vs the 30yr(3.26%)-not good for bank earnings.
W/R to the larger view as it pertains to central banks, I'm not a buyer of stocks until they ease further-providing a "liquidity put" to stocks. Specifically:
1)FED goes from tapering, with the risk of raising rates earlier than the current consensus-because of higher than expected inflation numbers and lower U3 unemployment-back to easing mode by tapering their taper or starting a new QE program
2)ECB goes into full QE mode to combat "credit engine" contraction that still plagues the Euro-zone
3)Talk of BOE increasing rates subsides-weaker macro-econ data needed vs the strong numbers recently
4)BOJ continues current path
6)PBOC, which is now currently easing, through loan programs and reduced reserve requirements eases further buy further reducing RR and lowering interest rates.
If I can get 3 or 4 of the above 5 to move in an "easing" direction, then stocks will be worth playing the upside. Until then, the reward/risk does not suit me as the flat treasury curve and the German 10yr near all time lows suggest very sluggish macro-econ data is coming and hence sales and earnings growth estimates, for the S&P 500, may not be attained.
Yes, I like regional banks if/when we get an "event" that causes a sell off, which morphs into a mini panic "grab for liquidity"-resulting in central banks initiating QE, in the case of the ECB and the FED taper their tapering or initiating a new QE program.
In other words, I am buying little until there is a significant market sell off and more QE by central banks as a response. Otherwise, stock prices are way to high for me to play the "buy the pulback" game or buy the "sector out of favor" game.
Obvious new today suggests that either the Russians shot down a passenger jet or their Ukrainian proxies shot the plane down with equipment given to them by the Russians.
Hi Commandor, I rode FCF on your call from $8 and sold at $9.40. Thank you!! Given what is going on in the world, would you get back in if this gets back to 8? As always, I really appreciate your knowledge that you share with the board.
QLGC, which may have a June Q issue because of soft hardware tech spending, may become a very good buy later the year with results improving in calender 2015. Why? INTC has a new server chip coming out in the 3rd Q, which will lead to an upgrade cycle in 2015(6)-which should be good for QLGC and ELX. Today Jeffries upgraded MLNX based on the next server upgrade cycle.
If QLGC has poor June and Sept Q's, the stock could trade down to around $9.00. At that price and at that time, 4thQ of 2014, QLGC would be a table pounding buy.
W/R to Japan, with their 10-yr at .54% and the latest CPI up 3.7% y/y, the real yield is a record low of negative 3.16%. As we all know, debt to GDP is over 250%, worse than even Greece. Japan's real interest rate should be positive 1-2%-at a minimum. So what is happening? The carry trade out of Japan-Japanese buyers are buying US and Euro-zone bonds because there is nothing to buy in Japan.
This is a situation that cannot pass the test of time. It will blow up! It is just a question of when. When that happens, all liquid markets will experience a sell off as Japanese will sell what they have overseas and repatriate money back to Japan. Selling will beget selling in a self-reinforcing negative loop until central banks reinstate or increase QE programs. With negative real rates in the US, UK and Japan-debt servicing will get harder and harder as negative real rates must move positive as total debt and inflation move higher.
I forgot to post at the time, but an indicator of market tops in the past 30 years have been buyouts of securities firms and/or money mgt firms. They tend to be worth the most near market tops as assets under mgt are at multi-year highs as well as optimism.
Flying under the radar was the sale of Russell Investments by Northwestern Mutual Life to the London Stock Exchange on 6/27 for $2.7 billion. Usually markets "top" within 30 days of such deals. Also, Barclays is selling its index business as well. So, the "top", consistent with past market tops, is within 30 days of the 6/27 Russell deal or within 30 days of so of the Barclays deal, when it is done-which will be soon-they are a reflection of human bahavior which has its cycles of greed and fear.
For the upcoming week, I expect a relief rally early in the week as the Portugal issues fade from memory, but will prove to be a good opportunity to sell into strength as new and other continuing issues will come to light inducing more net selling.
I also find curious is that the Ukraine is fighting a war with "Western" money-it own tax revenues in decline, is getting aid through the IMF and other sources. Russian backed separatists, or course, are getting aid from Russia. The current situation is not sustainable, as it is a new cold war, now gone hot, through Ukraine proxies. I don't expect Russia to back down, while Western countries and their financial institutions are weak and can't afford a drawn out war. Ukraine still has not paid their NG bill to Gazprom, so Russia can afford to wait until fall when the weather gets cold-to extort whatever "solution" they want after countries, dependent of Gazprom gas, get panicky on how they are going to solve their heating problems.
Again, it is my view, an "event" political or economic, will spark a sell off of enough magnitude to start a selling begets selling negative loop into a "grab for liquidity" until central banks start or reintroduce QE and others easing programs to inject enough liquidity to stabilize markets. Deflation will become the pervasive fear, so these programs will have to last to get inflation back to targets. Gold/silver should do the best during this time period as interest rates will be low with injections of liquidity by central banks will be high.
Like a broken record, I have been wary of Euro-zone frailties for months as I views recent sovereign bond markets rallies as a bubble with QE money, from the US and Japan, seeking relatively higher yields while fundamentals have improved little. One could easily argue the fundamentals have got much worse as debt outstanding has increased, as budget deficits continue at high levels (greater than 3% of GDPs), while the ability to service is worse as GDP growth is flat to slightly up.
We got a "warning shot" with the Portugal Bank problem, that sent markets down hard and fast-letting us know that markets are a mile wide, but only an inch deep. I believe Portugal is only the tip of the iceberg as sovereign bonds are way over-valued, banks are under capitalized, markets are thin and macro-econ fundamentals are flat.
Going back to 2007, Bear Stearns had two SIVs blow up, which was a 6 month warning that real estate markets were going to blow up in 2008. Whether Portugal is a 6 month "warning" or some other time frame, I think an event will happen to set up a grab for liquidity before the end of the year.
Still looking to harvest gains, raise cash, only be a selective buyer when the "market" gives me an absolute "bargain" and wait for that "event(s)" to create many bargains. There will be bargains as central bank policy responses will be more QE or other easing programs to keep many countries, institutions, etc from collapsing from the inability to service debts because of losses from the "grab for liquidity".
Are you replenishing the trading shares you sold last week? If so, what is the target price? As always, thanks for sharing your knowledge. It is very much appreciated.
From $7 to $8.50, back down to around $7.50 in a few days on bigger than average volume suggests a few things:
1)A fling for 5%+ should be forthcoming in days
2)Pullback from $8.50 should be close to finishing as it is about a 62% Finbinacci retracement level
3)Press release for earnings date, without warning would suggest sales/earnings recovery is starting in the June Q and to accelerate in the 3rd and 4thQs.
2nd "warning shot across the bow" today from the comments of Mohammed El-Erian w/r to liquidity in his comments that investment banks, due to regulation, are holding less inventory of many types of securities so when other large players go to sell or buy there is less liquidity in the market, so efforts to more large $ amounts of securities cannot be done unless their is a large price change vs historical norms.
My concerns that there could be an "event" financial or otherwise that could cause a sell-off followed by a grab for liquidity as many financial market players are over levered. Lack of inventory by market makers and lack of confidence in governments set up a scenario that stocks could sell off hard, in a short period of time, should an event occur.
Certainly, BO's regulatory minions war against banks, both US and European, is not a good backdrop for them to increase their market making activities, but do just the opposite. Probabilities of a "liquidity grab", later in the year, are increasing.
On the other hand, there are signs of increasing stress in the repo market, stress as it relates to liquidity drying up. I must confess I have not "studied" and do not have the knowledge of the repo market that I should have. But, given the lofty levels of bond and stock markets, any signs that liquidity is a problem is a "warning shot" across the bow.
Also, there have been increasing articles that the GDP deflator understates inflation. I would agree, but I've been reading that this understatement of inflation has been going on for years. Implication? GDP is way overstated. So instead of being around $17.5 trillion, GDP is closer to $12 trillion. Stocks, as a % of GDP are already at their 2nd all time highest. If GDP is closer to $12 trillion, then stocks as a % of GDP are at all-time highs by a wide margin.
Implications? Nothing new for me. Harvesting gains and currently no themes to buy-happy to be 70-80% cash-let others duke it out.
All up quite a bit for their last readings. If this trend continues, then the 2ndH of 2014 will have 3%+ GDP growth. With that growth will be increasing inflationary pressures. The questions for investors is how much will interest rates rise and how fast and at what level will rates will be a problem for stocks and gold/silver.
At this time, I think that economically sensitive stocks will do better than defensive names that depend on low rates. Copper should do better than gold and silver should continue to grind higher. What still concerns me though is an "event" that sends most players scrambling for the exits as leverage continues to increase in the world financial system while underlying fundamentals are improving, but not enough to justify the absolutely high level of stock and bonds prices around the world.
Thanks comm, did you ever invest also in alternative ene like wind or solar ? If the Ptc plane is confirmed also for 2016 may be worth a look to ( i.e. bwen drwi )
The large Insider Buying in various industries has pretty much stopped. I sold a few stocks today and will be looking to trim my portfolio more in the next few weeks...Good Luck and Happy 4th.
Every week I buy groceries for the group home I work at. Prices on some items are up 25%. Dairy, meat etc... whether this is temporary or not remains to be seen. Homes are getting back to precrash prices. Oil is over $100 a barrel. Healthcare is rising. Yet the new Fed chairwoman calls it "noise". I believe Yellen should take her ear plugs out and listen before this "noise" gets too loud.
Reads like KTCC did an agreement that has bank buy accounts receivable-of course at some sort of discount. Could mean nothing or is could be potentially bad news. It has been my observation that KTCC has done all of their own A/R collections-they didn't have hundreds of clients so it was easy. Going back 10-20 years ago, one of their clients declared bankruptcy leaving KTCC unable to collect several million of $s in tools, inventories and goods sold. Maybe they sense that could be happening again or with KTCC having more clients, perhaps they would prefer to contract out "some" collections vs hire more overhead.
For now, in my view, it is a minimal "news" event. Should there be an A/R issue in the future, I would be a buyer of more KTCC as it is just about the only stock I follow that is still undervalued. After taking gains on NG stocks, alot of gold/silver stocks, in recent days/weeks, I'm probably 70-80% cash with no "them" that I find cheap enough to put money into.
QE by central banks around the world have, just about, all liquid markets over-valued-some extremely over valued. This game will continue until inflation forces central banks to raise rates-dramatically and quickly-forcing many borrowers to sell as they get caught over-levered. This game, in my view, will last no longer than the 2ndH of 2016. It is my tendency to be early when it comes to buying into a theme that is very profitable and also early in harvesting those gains. For now NG and gold/silver still have a long way to go on the upside, but I'm waiting for a pullback on both before picking up more "trading shares". Otherwise, as far as the market is concerned, it is going to be a boring summer.