The "ringing bell" that sometimes marks the top/bottom of markets may have just rung for oil. The Saudis just issued $5.3+ billion in bonds on 8/11, the same time oil (WTI) hit a 6-yr low intra-day of $42.69. The Saudis have to sell bonds as the low oil price is blowing our their budget deficit to near 20% of GDP.
Gold/silver continuing to catch a bid as those markets are correctly anticipating the FED will have to add liquidity sometime later this year. It is still my view that the FED will wait, till perhaps Oct, for enough bad "data" before they increase liquidity in size. Between now and then gold/silver/oil will continue their rally, but then fail with those commodities getting close or making new lows, on light volume, marking a double bottom and make a great multi-yr buying opportunity.
Because the consensus opinion thinks China has entered the currency war, other Asian currencies are now falling vs the $ to preserve their relative export status to the US. For example, the S.K. currency just hit a 3-yr low vs the $. Products from Asia are going to be coming into the US at lower prices, competing with each other, and deflating domestic prices. Until the FED wises up, gets into the currency war, its going to be a grind lower for the US economy. "Jobs" numbers will be hit so hard, the Mr. Magoos, will finally get it. It is just a matter of time.
I've been creating "New Topics" for a couple weeks now and nothing seems to take-don't know if it YHOO technical problems or something else. Good to see a bid into gold/silver today as several of those "posts" were positive on both. Also were posts commenting on the internal weakness of the July jobs reports.
We are learning, about 10:30PM EST, that China has "moved' their currency down about 2% vs the $ in early Asian trading. Since I've been expecting this, my commentary has speculated that China will continue to export their deflation to us. For example, hot rolled steel is down 33% y/y for the 2nd Q vs last year because China mfgers-facing declining markets at home-are dumping steel to the US along with other "weak" currency countries like: Russia, Turkey, Japan and S.K. Continuing deflationary forces will pressure the FED to "ease" as opposed to "tightening"-although they have been "tightening" as measured by the monetary base, FED balance sheet and other monetary measures. Of course, how fast and how far China devalues the Yuan will determine the degree of the FED's policy responses.
The FED's labor market conditions index continues to be weak in July with a reading of 1.1-below June's 1.4, but way lower that Dec/Nov's 7.2 readings.
After the close today, PCTI announced a stock buyback which I suspected was coming. Mgt was a big buyer in the 2nd Q around $7.35-so under $6.00 is just too good not to take advantage of. Would like to see some insider buying in the coming weeks.
Bottom line, the FED is still playing "chicken" with the US economy-the Atlanta FED has GDP growth for the 3rd Q coming in a 1%. The FED will probably wait a couple bad jobs numbers before being forced to ease-although I'm hopeful they will "move" before the US economy has a negative GDP print. I'm still not a buyer of size until the FED measures I watch show the FED has added the liquidity the US and world economy needs.
Cash/share is down, net/net is down, the NexGen deal looks to be a bust. However, the stocks was $8.50+ back then. Now, it is under $6.00. In essence, giving up $1.00/share in cash to buy the stock $3.00 cheaper. If Meridian works out to be a profitable software offering, then PCTI will get an upside "kicker", just like when scanner sales have a big quarter. Only now, there are little expectations for either. In a couple weeks, most who want out will have sold, what will be left will be value buyers and stock buybacks-giving PCTI time to rebuild their credibility. Not looking for instant returns, but I am looking at a 50% gain in a year plus dividends.
With today's 10 year high in ISM services index (60.2) it shows that the services part of the economy is doing well, but mfging is doing poorly as measured by all sorts of other data. The difference mostly attributed to the strong $, the DXY hit a 3.5 month high today at 98.22. Services jobs, are more plentiful than mfgering but pay, on average, is substancially less, this is why consumer pending continue to be soft and has been all year.
Japan reported that its monetary base was up appox 33% in July y/y, whereas the US monetary base was flat. Not to much of a stretch that the Yen will make new lows vs the $ in coming weeks/months. As a consequence US mfgers will continue to lose market share vs Japan competitors. The FED continues to sacrifice the US industrial base for "normalization"-the game of chicken continues.
I bought 5000 share today at $5.75. Cash/share is $2.30, net/net is $3.75, so at $5.75 paying $2.00/share for a business that will earn $.40 next year-according to guidance in the CC. Guidance, which I believe is conservative. Under $6.00, the market is pricing PCTI based on the growth and margin profiles of the antenna and services business and little else. Upside "kickers" will come from scanners (very low expectations now), Meridian analytical tools software sales (low expectations) and the "Public Safety LTE build out that is in MSI's news today"-PCTI sells antennas to that land mobile radio market.
The longer PCTI stays below $6.50, the greater % they get a buyout offer or do an LBO. CAMP would be a likely buyer in my view. Also, the company bought back 380,000 shares in the 2nd Q at an average price of $7.35-they will be very active in the 3rdQ. I would also expect insiders to be buyers. Usually it takes a few days to a couple weeks for all the sellers to get out that want out, so there is time to build a position.
Today's factory orders for June were up 1.8%-seasonally adjusted vs May 2015. How does that compare vs June 2014. How about down 5% $478.5 billion vs $503.8 billion. How about factory orders are down y/y for 8 months in a row. That is worse than 2009. My conclusion, the quality of financial and government reporting is attrocious and bordering on fraudulent.
The strong $ is killing US mfgering. I'm just amazed at all the"happy talk" that is just so much #$%$.
Can stocks keep their lofty levels? Sure, because if the FED raises rates then the 10 yr and 30yr bonds yields will fall-I'm looking for the 10yr to get below 2%. Under this scenario, all the bond suragates, that pay a decent dividend, will stay over-valued because bond money will keep bidding them up.
In the meantime, the FED should be actively easing with open market operations-they have not to a sufficient degree.
Read over the weekend, Comex gold inventories-available for delivery-are at all-time lows. May mean nothing, but is does suggest, unlike the paper markets, physical supplies of gold are tight. Potential near term catalyst. SA gold miners are negociating with union workers on new contract. The workers basically want % increases so high, that SA gold companies would no longer be able to operate profitably. If workers go on strike and/or companies do a "lockout", SA gold production stoppages would further contribute to world gold physical shortages. Shorts in the "paper" markets would get squeezed-gold could go up $30-$50/day for a week before they cover.
I continue to nibble on gold/silver stocks-bought more GG today.
Last week I bought some PCTI at $6.55 with the sense that the large seller has finished getting out. I'm also getting the sense that micro-cap buyers have become way to bearish, letting many micro-cap stocks get too cheap. With that in mind, I bought some DSPG today at $8.75.
Will become a buyer, in size, when I think psychology has changed w/r to FED policy. On that front, the $ peaked, as measured by the DXY, in mid March at 100.40. Recent highs have been 98.15 with a double top in recent weeks. Still, just about all commodity indexes have hit new 13 years lows today-the world economy is slowing. Yet, the FED has "eased" in the sense that a few months ago they were expecting the FED funds rate, at the end of 2016, to be 1.625%. Now that expectation is 1.25%. So, the FED has taken down their schedule of FF rate increases-an "easing" of future rate increases. I think stock market investors are getting the feel the FED and PBOC will have to actively ease going into 2016-keeping stocks higher than they should be vs earnings prospects (flat) for 2015.
As with gold/silver, oil/NG I'm not a buyer of technology until I get the strong sense that the $ has bottomed-although I did buy AG, GG, ABX and PAAS in recent days.
The FED, is still playing "chicken" with the US economy and the world economy by not supplying enough $s to markets. I draw this conclusion because commodity indexes-CRB and BCON-continue to make new multi year lows, the FED's balance sheet along with the Monetary base are flat y/y and M2 is up only 4.4% annualized in the last 13 weeks. For the US economy to get stronger, these measures have to turn up significantly before I'm ready to invest in size.
Other measures of the economy are weak, RR car loadings have been weak, y/y comparisons, all year with usually only 3-5 of 10 sub indexes up y/y. In the latest week, only 1 sub index was up y/y. Steel production has been down y/y all year with the industry at 71-74% capacity. In addition, the Central Bank of China, even though they have been lowering interest rates and reserve requirements, are behind with monetary stimulus as their domestic economy is suffering from deflationary forces. So both the FED and PBOC have to do more to to stimulate aggregate demand before I'm a buyer of tech.
Of course, something could get so cheap as to not be able to pass up. Don't know that price for QLGC yet, will wait for sellers to wash themselves out and for insiders to start buying. Stocks, in my view are still way over valued and I don't want to get too long on stuff that is cheap, but could get cheaper in a broad sell off.
Starting to read and catch more commentary by analysts that world $ liquidity is just too low-which has been a "theme" of mine for several months. As we are witnessing, the $ is making new highs against many of our trading partners, commodities are hitting 5-13 year lows and world GDP estimates are coming down. It is all because the FED is not supplying enough $s that the world is demanding to transact business. Also, China has been holding their currency stable vs the $, but let is weaken today from 6.2049/$ to 6.2145/$ as posted by the Kitco website. If this trend continues, then China will be exporting their deflation to the US. As a consequence, the FED will have to increase more liquidity to compensate.
Bottom line, I'm buying little until is is apparent the FED has started to ease. Now they could increase interest rates and still ease if they were active in open market operations by buying treasuries-adding liquidity to the banking system which would "funge" its way around the world over time.
Interesting developments in the NG market. For the most recent week production y/y was up only 4%-earlier in the year it was close to 10%. With additional export capacity coming on stream later in the year-more pipeline capacity to Mexico and LNG's exports from the Sabine Pass facility-domestic demand plus exports will be greater than new supply if y/y production remains up 4% y/y or below. This could be the "bullish" turn NG has needed to move the trading range from $2.50 to $3.00 to $3.50-$4.00 sometime in the 1st Q of next year.
Yes, I agree. There was an "activist" investor in PCTI the last 2 or 3 CCs that was putting pressure on PCTI mgt to use their excess cash for special dividend and/or more aggressive stock buy back. Instead PCTI made an acquisition that soon there after lost its largest customer. I think this guy is selling and is not yet done.
From other company's results, I get the feel that Telco capX spending was soft for the June Q and will continue to be into the 3rd Q. If so, scanner sales will likely be soft-PCTI's highest gross margin product line. In addition, from a recent press release it appears that product line got a new sales manager-perhaps the prior one was not producing good enough results. I've staid away from buying any PCTI in recent weeks. However, after the Q is out and if the stock get low enough-closer to $6-I'll be a buyer.
UPL and ECA are highly leveraged and mostly unhedged for 2016. With the consensus that the $ will remain strong, hence commodities weak, many money managers are liquidating tertiary oil/NG positions-so that they only own most liquid mega cap companies. I expect oil/NG to bottom late this Q or by the middle of the 4thQ, so I have not been a buyer either. The "key" for me will be what the FED is going to do as far as adding liquidity to financial markets to weaken the $.
Did buy TAHO and FSM near the close today.
Consistent with prior comments that the $ is to strong, it is making new highs or close to multi-year highs vs the:Euro, Canadian $, Aussie $, NZ Kiwi, S.K. won, Mexico Peso, Brazilian Real just to name a few. Bottom line, exporters are having a tough time and mfgers that have import competition, such as steel-the SLX made a multi-year low today-are getting crushed. This is all a negative for higher paying mfging jobs and the 3/1 multiplier effect. High paying oil/NG jobs are also continuing their decline.
Just after today's comments, the FED's Fischer came out with commentary that inflation is too low in the US. "He" will have to stop the DXY from going higher.
Not yet today, but may later in the day.
For gold/silver their are two questions to answer for the bullish case. When will the DXY stop rising, which is the main reason gold/silver and other commodities going down? With nearly all countries, not just Greece, having debt issues (world debt to GDP at all time high 286% vs world GDP with GDP growth slowing yet debt continuing to increase) what will central banks policy responses be to enable debt service to be relatively painless?
The answer to Q1 marks the bottom for gold/silver, CRB index, BCON commodity index etc etc. The answer to Q2 determines deflation, defaults on a grand scale and world depression or central banks inducing inflation to lower real interest rates, keep nominal rates low as well to "rob" from savers to subsidize borrowers to be able to service their debt. To induce inflation, which most central banks want to be around 2%, they will have to increase liquidity, especially the FED, as the world is demanding more $s, but the FED has been stingy so the DXY goes up commodities down. If the world is to get to 2% inflation, commodities will have to rise-oil will have to bottom-the FED has to stop the assent of the $.
In my view, the FED has been relatively accommodating the last 4 weeks-as measured by M2, its balance sheet, reverse repo and free bank reserves, they need to do much more. Demand pull inflation is not happening, so the FED is going to have to "engineer" cost push inflation. Gold/silver bottoms when oil (energy) bottoms with a few days of each other.
It has been my view oil bottoms in the 4th Q unless some supply disruptions occur earlier or there is some "financial event" that forces the FED to "ease".
HON actually had flat gross income vs last year, but EPS came out higher by 9.1%. Still the market celebrates HON's great numbers-but they were flat.
From all that I have been able to read about Greece, I have found what the costs (estimated) of them staying or leaving the Euro. If they leave, creditors will get 25% of their money, if Greece stays, the "hope" is they will get 60% payback-the difference being about 100 billion Euro.
Implication, if Greece were to leave, in the coming weeks, and estimates are correct, the ECB's entire capital base would be wiped out as the ECB is into Greece about 130 billion Euro and their capital is about 98 billion euro. This is why the ECB is bending over backwards to keep Greece in. Now does it matter if the ECB's capital is zero and their balance sheet go to infinite leverage. It should, as the only "prescription" would be for world massive monetary easing to reliquify the ECB, IMF, Eurozone banks and anyone else into Greece. Where is that money coming from? It will have to come from the FED and PBOC.
So the extend and pretend game with Greece goes on, but the day of reckoning has to come-the math is just too compelling.
INTC operating income down 24.6% y/y, yet non-gap EPS flat y/y $.55 vs $.55/share.
Buybacks and tax-rate % financial engineering is masking terrible results. When the #$%$ hit the fan, there will be a big air-pocket for stocks because in a "bear" market mode, the skeptics will rule as opposed to the "greater fools".
According to Central bank of India, paper market for gold trading is 92X more than the physical market. US silver coin premium is at a one year high of 22% vs 13% earlier in the month-because there is a physical shortage of silver.
Gundlach said today, given the weak nominal GDP numbers, the FED should be "easing". MS, in recent days, has put out research that China maybe be exporting recession in the next 2 years. From another source, because car sales will down y/y in Chine for the month of June (the first y/y decrease in two years), inventories are now 145 days vs the normal 24-36 days.
Canada central bank lowered interest rates and took down future estimates GDP and inflation. BOJ kept QE and interest rates the same, but lowered their GDP and CPI outlooks.
If you look at JNJ's operating income y/y it was down 17%-this stock should sell for 8-10 PE vs double that. Every week Greeks's banks are closed, increases the bailout money needed by 10 billion Euro-the deal as it stands now is totally inadequate and does not reflect reality.
In my view, stocks are way over valued, gold/silver are being held down by paper markets-while physical demand is robust-and the FED is playing a game of "chicken" with the world by holding out the notion that the US economy and the world economy are strong enough for the US to raise rates when, in fact, the FED will have to "ease" to avert world recession-making debt service impossible for millions of debtors (government, businesses and individuals) around the world.