Archive for September 6th, 2012
17 Things That Make You Dumber, and other Weekend Reads
Thursday, September 6th, 2012
Here are this week’s reading diversions for your personal enlightenment. Have a truly splendid weekend!
17 Things That Make You Dumber – Business Insider
With all the talk about self-improvement these days, people don’t pay enough attention to self-worsening. In fact, there are many common behaviors that have been shown in one or more studies to make people stupider
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Benefits Of Chocolate: Study Finds Eating Cocoa Daily May Improve Cognitive Impairment
Here’s another sweet reason to eat chocolate: Consuming cocoa may help people with mild cognitive impairment — a condition that affects an estimated one in five adults over age 65.
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The benefits of fish oil: Seven surprising… | Chatelaine.com
It’s no secret that fish oil keeps your inflammation down and digestion in check. But what you may not know is that its benefits can impact everything from city living and bone density to fat burning and brain power. Here are seven things you may not know about the benefits of fish oils and how you can go about ensuring you get enough each day:
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C-Sections May Not Provide the Brain Benefits of Vaginal Birth – Yahoo! News
In the study, mice born by a vaginal birth produced a brain protein called UCP2, which is important for the development of the hippocampus, a brain area responsible for short- and long-term memory.
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10 Early Warning Signs Of Diabetes To Watch Out For From SymptomFind.com
Those who suffer from diabetes have extra sugar in their blood, forcing the kidneys to work harder to filter the sugar out of the blood. This causes increased urination and then increased thirst when dehydration results. So if a person notices that he is substantially thirstier than normal, he might want to visit the doctor.
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Crohn’s Disease – National Digestive Diseases Information Clearinghouse
In Crohn’s disease, inflammation extends deep into the lining of the affected part of the GI tract. Swelling can cause pain and can make the intestine—also called the bowel—empty frequently, resulting in diarrhea. Chronic—or long-lasting—inflammation may produce scar tissue that builds up inside the intestine to create a stricture. A stricture is a narrowed passageway that can slow the movement of food through the intestine, causing pain or cramps
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Really? During a Heart Attack, Dial 911 and Chew an Aspirin – NYTimes.com
Studies show that for men and women, the symptoms can differ. Men are more likely to experience the classic signs, like chest pain, shortness of breath and radiating pain in the neck and arms. Women are more likely to experience severe fatigue, indigestion and cold sweats.
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Chocolate found to reduce risk of stroke in men – Winnipeg Free Press
A new study finds that compared with men who reported eating little-to-no chocolate on a regular basis, those who had the highest weekly consumption of chocolate — about 63 grams per week, or just a little more than 2 ounces — reduced their likelihood of suffering a stroke by 17 per cent.
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Why garlic, oregano, tumeric, rosemary and ginger are good tasting and good for you – thestar.com
What are phytonutrients? They’re compounds found naturally in fruits and vegetables (“phyto” is Greek for plant), and some research suggests there may be 10,000 phytochemicals in nature that could help protect against those aforementioned diseases.
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Breast Cancer Treatment: Two Fruits That Could Kill Cancer
Here are some deliciously promising results in a study on breast cancer. Texas researchers have found that extracts from peaches and plums killed breast cancer cells, even the most aggressive kinds. Not only did the cancerous cells die, but also no nearby healthy cells were affected. A targeted kill by fleshy fruit.
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10 Ways to Defend Yourself Against Negativity
There is little difference in people, but that little difference makes a big difference. The little difference is attitude. The big difference is whether it is positive or negative.
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5 Foods to Control Migraines | Reader’s Digest
While experts don’t know exactly what causes migraines, they do know that almost anything can cause one – including weather changes, strong odours, stress, loss of sleep, certain foods and drinks, and fluctuations in estrogen levels (why no doubt three times more women than men get them). Avoiding the foods that often trigger migraines while making a point of eating those that help prevent them may reduce the number — and intensity — of headaches you get
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What Really Happens When You Get Angry | Reader’s Digest
When we get mad, our rational prefrontal lobes shut down and the reflexive back areas of the brain take over. The left hemisphere also becomes more stimulated as the brain’s hormonal and cardiovascular responses kick in.
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5 Foods Every Man Should Eat More Of | Food & Nutrition for Men
Men and women are built differently, that much is clear — but that’s not where the differences end. Unique health concerns and nutritional needs also separate the sexes. The five foods featured on this list are chock-full of nutrients men need most, including omega-3 fatty acids, zinc, lycopene, magnesium, B vitamins, folate, antioxidants, vitamin E, and boron. These picks support sexual function, protect against prostate cancer, and reduce cardiovascular disease risk — to name just a few benefits.
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5 Foods Every Woman Should Eat More Of | Food & Nutrition for Women
For busy women of all ages, five foods boast high scores in essential nutrients — iron, calcium, magnesium, vitamin K, folate, vitamin D, and omega-3 fatty acids, in particular. Best of all, these foods are easy to find at practically every grocery store, no matter where you live, and each of them takes less than 15 minutes to prepare.
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7 Surprising Signs of an Unhealthy Heart – MSN Healthy Living – Heart & Cardiovascular
We’ve all read the signs of a heart attack listed on posters in the hospital waiting room. But what if there were other, earlier signs that could alert you ahead of time that your heart was in trouble?
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5 Secrets to Lifelong Weight Loss | Yahoo! Health
Most people can lose a quick five or ten pounds before a big event. But how do you keep the weight off — today, tomorrow, and for the rest of your life? Not even everyone with “lucky genes” can stay slim for a lifetime without the help of a few basic strategies.
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Elena Paravantes RD: 5 Ways to Eat Like a Greek
The traditional Greek diet circa 1960 is considered one of the healthiest, if not the healthiest diet, in the world. It served as the basis of the Mediterranean diet as we know it today. Let’s see 5 healthy habits of the Greeks.
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Digestive health: Five fermented foods to… | Chatelaine.com
Did you start the day with kefir in your smoothie? Wash down your lunch with a glass of kombucha? How about pickles or kimchee for dinner? No? Chances are you didn’t eat anything fermented today. If you did, congratulations! Your gut says ‘thank you!
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10 Simple Habits That Could Help You Live To 100 | The Dr. Oz Show
It was not too long ago that living to 100 was considered a nearly impossible feat. Yet with more and more advancements in medicine and modern life, reaching 100 is not as far out of reach as we once thought. To make sure that your journey to 100 is one you can be healthy enough to enjoy, Dr. Oz has put together his favorite 10 simple habits that you can add to your everyday routine.
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10 Vitamins You May Need if You Have Crohn’s – Health.com
In Crohn’s disease, damage to the digestive tract, and sometimes the surgery and medication used to treat it, can make it hard for the body to absorb nutrients.
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You sound like a broken record. And everyone has tuned you out. So why waste your breath?
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Tags: Canadian Market, energy
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Rosenberg: The New Normal Of Investing: Bonds For Price, Equities For Yield
Thursday, September 6th, 2012
The dividend theme has hardly run its course. As David Rosenberg of Gluskin Sheff illustrates in his latest note, the income-starved retiring boomers are being forced to garner income more and more via the equity market where dividends are up more than 8% over the past year.
STOCKS FOR THE YIELD, BONDS FOR THE PRICE?
Because of ultra-low interest rates, interest income growth has vanished completely. If you want income, you have to go to the lesser investment grade part of the corporate bond market, and even here, it is tough to get even a 7% coupon these days. Or you gravitate towards the dividend growth and dividend yield areas of the equity market T-bills and bank deposits protect capital but do not generate any return at all so that is a non-starter except for the most acute risk-averse folks in our midst.
And here is the great anomaly. Back in the early 1980s, investors bought equities for capital appreciation and they purchased Treasury securities for yield. Today it is the complete opposite. As the ongoing shift into hybrids strongly suggests, investors are gravitating to the equity market for a yield in a world where yield is increasingly a scarce commodity.
Moreover, investors are not buying Treasury notes and bonds for yield any more, but for the capital gain they generate – especially with The Fed’s interventions taking more and more duration out of the private marketplace.
All the talk about “who in their right mind would lend 10-year money to Uncle Sam at 1.6%” obscures the fact that at low interest rate levels, returns get dominated more by the price changes in the bond. This is why anyone who, say, bought a plain-vanilla long bond a year ago at what seemed at the time to be a puny 3.7% yield, managed to experience a 22% total return: or a 44% net return for a 30-year ‘strip’ (zero coupon) bond.
So welcome to the new normal of investing: buying bonds for the price; buying equities for the yield.
Source: Gluskin Sheff
Tags: David Rosenberg, Gluskin Sheff, Rosenberg, Rosie
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Economic Insights: Housing’s Slow Climb Out of the Cellar (Ezrati)
Thursday, September 6th, 2012
by Milton Ezrati, Market Strategist, Senior Economist, Lord Abbett
The housing market keeps reporting good news. Sales volumes have risen, as has new construction activity. Even real estate prices, after falling for years at an alarming pace, have begun to firm. The whole picture is a welcome change from the steep slide and stark fears of past years, and it promises, at long last, that going forward housing will contribute to the economy’s overall health, at least marginally so. But it would be a mistake to take such news too far. The real estate sector still has much to overcome. If the recent flow of data offers reasonable assurances that the worst is over, the remaining impediments will contain any future gains in housing. Still, gains, even when contained, are a vast improvement over the free fall of recent years.
The general picture certainly is upbeat. The Commerce Department reports that new home sales jumped almost 9.7% during the first seven months of the year, and the National Association of Realtors reports that existing home sales rose 2.1%. Neither measure registered a gain in every month, but it is clear that the long decline in home sales has ended. There is good reason to look for sales support, too. Low mortgage rates and past declines in home prices have made housing much more affordable than at the last cyclical peak, more affordable nationally, in fact, than at any time since the early 1990s. Certainly, homebuilders have taken the turn to heart. Even including a June pullback in new housing units stated, this kind of construction activity shows a gain of almost 8% during the first half of the year.
Most encouraging, especially after the intense financial pain of 2008–09 and its aftermath in 2010 and 2011, is the recent rise in residential real estate prices. The much-followed S&P/Case-Shiller Housing Price Index1 reports that its composite of prices in 20 major metropolitan areas gained every month this year through May (the most recent period for which it has data). Each month showed only a modest advance, but the net increase over the whole time amounted to 2.4%, or nearly 6.0% at an annual rate. That is a far cry from last year’s 4.1% drop and much steeper declines in 2010 and earlier. Maybe even more encouraging is the regional pattern. All but three of those 20 metropolitan areas showed price gains. New York City, for example, reported essentially flat, while Atlanta showed a 1.9% annualized decline and Detroit showed a 4.7% decline. Meanwhile, formerly hard hit Las Vegas showed an 8.6% annualized gain, Miami showed a 16.1% gain, and Phoenix showed a 30.4% average annualized home price gain.
But for all the relief, persistent impediments will moderate the pace of improvement. One problem is credit. As affordable as housing has become, banks remain reluctant to lend for mortgages and real estate deals generally. According to the Federal Reserve’s senior bank loan officer survey, lenders, though they have eased their credit restraints from the extremely tight policies of 2010, nonetheless remain extremely cautious. Consistent with such attitudes, Fed statistics show only the slightest increase in lending for real estate during the first six months of this year and even a slight dip in such lending activity in July. In time, such restraint will ease further, but the memory of 2008–09 will doubtless impose considerable caution for a long while yet.
At the same time, a still substantial inventory overhang should constrain any price gains. According to the Commerce Department, the unsold supply of new homes on the market amounts to 4.9 months’ supply. Though this figure is well down from the six to seven months’ supply of 2010 and 2011, this inventory is not especially tight. On the far more important market for existing homes, the National Association of Realtors reports 6.6 months’ supply of unsold properties on the market at current sales rates. This figure is also well down from numbers like 9.5 months’ supply in 2010 and 12 months’ supply in 2009, but it is still high by historical standards, which record an average of closer to five months’ supply. What is more, these inventory statistics fail to account for the still large backlog of foreclosures that effectively overhang the market with a so-called “shadow inventory.” It is hard to gauge the full extent of this shadow inventory, but, with mortgage delinquencies still at close to 10% and charge-offs at close to 1.5%, it likely exceeds the inventory figures recorded by the Commerce Department and the National Association of Realtors by an amount sufficient to bring the effective supply of unsold properties closer to 12–18 months’ sales at current rates.
Certainly, such inventory considerations recommend a more sober interpretation of recent improvements than some are showing. So also does the continued caution shown by lenders, especially where mortgages and real estate are concerned. But if circumstances still argue against undue enthusiasm, they do suggest strongly that the worst of the nation’s real estate problem is behind it. If going forward the figures on prices, sales, and construction will hit occasional snags, the general trend toward healing constitutes a major relief after the great weakness, indeed the free fall of past years. It also makes a continuation in the general economic recovery that much more likely.
1 The S&P/Case-Shiller 20-City Home Price Index measures the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions across the United States.
The opinions in the preceding commentary are as of the date of publication and subject to change based on subsequent developments and may not reflect the views of the firm as a whole. This material is not intended to be legal or tax advice and is not to be relied upon as a forecast, or research or investment advice regarding a particular investment or the markets in general, nor is it intended to predict or depict performance of any investment. Investors should not assume that investments in the securities and/or sectors described were or will be profitable. This document is prepared based on information Lord Abbett deems reliable; however, Lord Abbett does not warrant the accuracy or completeness of the information. Investors should consult with a financial advisor prior to making an investment decision.
Investors should carefully consider the investment objectives, risks, charges, and expenses of the Lord Abbett funds. This and other important information is contained in each fund’s summary prospectus and/or prospectus. To obtain a prospectus or summary prospectus on any Lord Abbett mutual fund, contact your investment professional or Lord Abbett Distributor LLC at 888-522-2388 or visit us at www.lordabbett.com. Read the prospectus carefully before you invest.
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Bill Gross: Investment Outlook (September 2012)
Thursday, September 6th, 2012
Investment Outlook
by William H. Gross, PIMCO
September 2012
The Lending Lindy
- Our entire finance-based monetary system – led by banks but typified by insurance companies, investment management firms and hedge funds as well – is based on an acceptable level of carry and the expectation of earning it.
- In a New Normal economy where lenders dance to the Blue Danube instead of the Lindy, how should we move our own feet? Carefully, I suppose, and with recognition that historic returns are just that – historic.
Citigroup’s Chuck Prince will likely join Irving Fisher in the annals of market history for his now infamous “As long as the music is playing, you’ve got to get up and dance.” Unlike Fisher’s quote, however, which affirmed a permanent plateau of prosperity in 1929, Prince’s faux pas may have been interpreted unfairly. History books will never record the context under which his statement was made, but what if instead of subprime-specific, Mr. Prince was referring to his job as a banker? What if he had rephrased his response to “It’s the job of a banker to keep on lending”? Well now, that would be a different story altogether. Today, that quote would earn him a Medal of Freedom from President Obama at a White House gala! And so I suggest in this instance we don’t take him at his literal word, but take him at his role as an ex-CEO of one of the world’s largest banks and see just where that takes the lot of us – sovereign, institutional and individual investors who in combination comprise what we now call our global financial system – all $150 trillion or so of it.
Too much debt
Credit, of course, is what makes the global economy go. We wouldn’t have gotten very far over the past several centuries despite Edison, Bell and Steve Jobs if barter was the accepted form of commerce. Even cash, serving as a medium of exchange and a disreputable store of value could not have promoted 3–4% real GDP growth in this gargantuan economy unless borrowers and savers were willing to exchange future promises – to utilize credit. Wimpy – in my oft-cited cartoon – said it best, “I’ll gladly pay you Tuesday for a hamburger today.” So McDonald’s grew from a million to 500 billion served and Wimpy and his wimpalikes were delighted in the exchange, although their arteries and midsections inevitably came out a loser. Still, the point is that our modern financial system, levered and fragile as it is, has been a beneficial and productive component of prosperity. If it were otherwise, our global economy would resemble something out of the dark ages in the early 20th century. High fives, then, for the Princemeister and his alter ego Mr. Wimpy – they have made a great combo-platter. But in order to promote and indeed foster continuing symbiosis, both borrower and lender need to operate in a nutrient-rich environment, a “credit” petri dish of sorts which fosters strong bones and healthy lenders and borrowers in their adult years. That unfortunately does not seem to be the case.
Wimpy’s weight-challenged midsection is an obvious testament to the overleveraged condition of today’s global borrowers. Too much debt leads to forced diets and delevering, a process which has been ongoing since Lehman 2008. Not only households, but financial institutions as well as many countries have reduced their caloric intake which in turn has promoted slow growth and in some countries near recession and/or depression. Borrowers are just not in a healthy place and if history is our guide, their restoration may be almost Biblical in terms of timing: seven years of fat followed by seven years of lean – perhaps even longer.
Too little return
Lender Chuck Prince’s figurative health, however, is not so obvious. Certainly bank balance sheets and creditors in general need to downsize assets, increase equity, or both. That by itself will be a disincentive for economic growth. But in addition there is the lender’s current precarious lack of return, yield, or call it “carry” that threatens additional credit extension in future years.
A lender will not easily lend money to an obese over-indebted borrower – that much is clear – but she will also not extend a check when the yield, carry and return on investment is so low that it cannot compensate for historic business model overheads. That is when Chuck Prince’s dancing turns from a quick step into a waltz. When yields are too low, and acceptable risk spreads so narrow that top line interest revenue is increasingly marginalized, then lending is at risk. Excessive historical overhead represented by rents, salaries, pension and health benefits, to name just a few, force financial and lending institutions to do one of two things: They lever up to cover those costs or they slow or shut lending down to preserve equity and the ultimate franchise. The levering up is indeed difficult given the 2008 financial crisis and the ensuing follow-through of intensified regulatory oversight. And so, what we are witnessing instead is the beginning of a waltz, a dance where financial institutions such as banks, insurance companies and investment management firms fail to reap the economies of scale so reminiscent of the prior era of fat as opposed to the present one of lean. In the process, they lay off, instead of hire new workers; close branch offices or even ATM machines by the thousands as did Bank of America recently; and yes, ultimately reduce the rate of lending or credit growth which propelled the global economy so effortlessly over the past century.
If the dancing has slowed down, then the reason is not just an overweight partner. It’s that the price of money (be it in the form of a real interest rate, a quality risk spread, or both) is too low. Our entire finance-based monetary system – led by banks but typified by insurance companies, investment management firms and hedge funds as well – is based on an acceptable level of carry and the expectation of earning it. When credit is priced such that carry is no longer as profitable at a customary amount of leverage/risk, then the system will stall, list, or perhaps even tip over.
For the current shipwreck perhaps we have the Fed and other central banks to blame. Zero bound interest rates according to their historical models should inevitably and inexorably lead to dynamic real economic recovery. Who wouldn’t borrow at near 0% yields – namely the banks – in order to relend at seemingly profitable spreads? Who wouldn’t borrow at 3.5% for a 30-year mortgage – namely homeowners – in order to match or even reduce current rent payments? Well, they haven’t. Not in the amounts they were supposed to in any case. Structured impediments such as regulatory risk standards for banks and fear of losing money for households have thrown a monkey wrench into those models. Central banks are agog in disbelief that the endless stream of QEs and LTROs have not produced the desired result. Wimpy and Chuck are waltzing, not quickstepping, even with a band playing in up tempo.
Strategy recommendations
What then is an investor to do? In a New Normal economy where lenders dance to the Blue Danube instead of the Lindy, how should we move our own feet? Carefully, I suppose, and with recognition that historic returns are just that – historic. Last month’s “dying cult of equity” Investment Outlook elicited a lot of excitement, but somehow failed to impress readers with its main point: Returns from both stocks and bonds will be stunted. How could one argue otherwise on the bond side with investment grade bonds yielding only 1.75%? How could one argue otherwise for stocks under the assumption that bond and stock returns were at least in part mathematically conjoined at the hip? How could one argue otherwise when it is obvious that boomers and X’ers, Y’s and Z’ers are likely to be disenchanted for their own good reasons for years? How could one argue otherwise when it is apparent that stock market trading has been taken over by machines – that HAL rules the stock exchange roost and does a bad job of it at that? Well, some did and some will continue to argue the counterpoint. Chart 2, however graphically displays the mood of the public as opposed to the mood of the pundits. Only time will determine who was right and who was wrong, even if stocks outperform bonds as indeed I predicted.
The Dying Cult of Equity
Most individual investors don’t have the privilege of time nor the choice of risking their investment dollars while being able to recoup it only at .1% money market or CD rates. An investor, it seems, must learn a new dance to fit the diminished return size of the modern dance floor.
If I were an individual investor, I would do this: Balance your asset mix according to your age. Own more stocks if you are young, but more bonds if you are in your 60s, like myself. If you choose an investment advisor, a mutual fund, or an ETF, make sure that your fees are minimized. After all, if overall returns average 3–4% annually how can you possibly afford to give 100 basis points of it back? You cannot. And be careful. The age of credit expansion which led to double-digit portfolio returns is over. The age of inflation is upon us, which typically provides a headwind, not a tailwind, to securities price – both stocks and bonds.
If you are an institution be cognizant as well of the above, but in addition, recognize that higher returns – from both stocks and bonds – usually emanate in countries and economies which exhibit higher growth. And don’t trust any country, including the United States, to forever remain a clean dirty shirt. There’s mud aplenty in our future, which I’ll expound more about in next month’s Investment Outlook.
Until then, like Chuck Prince and his buddy Wimpy, you should keep on dancin’. It won’t likely be the Lindy or the Quickstep, because our credit-based financial system is burdened by excessive fat and interest rates that are too low. It will be a new, slower-paced dance by necessity but Chuck was right: it’s better to be on the dance floor than a wallflower on the sideline. You’ve just got to watch your step.
William H. Gross
Managing Director
Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk. Equities may decline in value due to both real and perceived general market, economic, and industry conditions.
Statements concerning financial market trends are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market.
This material contains the opinions of the author but not necessarily those of PIMCO and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. ©2012, PIMCO.
Copyright © PIMCO
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Draghi’s Plan for Bond Buying Revealed
Thursday, September 6th, 2012
Bloomberg is out a few minutes ago with details of the ECB’s Draghi has planned in terms of bond buying. The surprise is that it will be sterilized which means it won’t add to the money supply, unlike how we do things in the U.S. (excluding Operation Twist). My take is that appears to be a concession to the Germans. However it will relieve short term pressure on countries that are willing to submit to the plan as it is unlimited in nature. Of course it does nothing on the long end.
There have been a lot of rumors of a “secret rate cap” or a “rate band” leaked the past few weeks but they seem to have decided against that as well. As noted yesterday they are willing to go up to 3 year debt securities. This is a well timed leak so the market is not surprised tomorrow. Initial market reaction is benign, futures quickly jumped about 0.3% on the news but have fallen back some.
- European Central Bank President Mario Draghi’s bond-buying proposal involves unlimited purchases of government debt that will be sterilized to assuage concerns about printing money, two central bank officials briefed on the plan said. Under the blueprint, which may be called “Monetary Outright Transactions,” the ECB would refrain from setting a public cap on yields, according to the people, and a third official, who spoke on condition of anonymity. The plan will only focus on government bonds rather than a broader range of assets and will target short-dated maturities of up to about three years, two of the people said.
- The officials said policy makers are likely to adopt the proposal, with Germany’s Bundesbank remaining the sole objector. At the same time, one said Draghi’s relationship with Bundesbank President Jens Weidmann remains relaxed, and the two men only disagree on whether risks inherent in the bond plan are likely to materialize.
- To sterilize the bond purchases, the ECB will remove from the system elsewhere the same amount of money it spends, ensuring the program has a neutral impact on the money supply.
- While the ECB doesn’t expect to have to spend large sums of money on bonds, Draghi’s plan calls for no limits to be set, two of the officials said. The ECB also won’t have seniority on any bonds it buys, they said. No yield-spread targets or bands will be set publicly, they said. Two said targets won’t be set internally either and that interventions will be discretionary.
- Draghi will stress conditionality of the program tomorrow, with the ECB likely to stop buying the bonds of any government that fails to meet the conditions it agrees to when it signs up for aid from Europe’s rescue fund — a precondition for ECB action — two of the people said. Another proposal is for the ECB to sell the bonds it has bought if a country doesn’t comply with the conditions, two of the officials said.
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What, Me Worry?
Thursday, September 6th, 2012
by Peter Tchir, TF Market Advisors
The Importance of the Bund Auction
Markets are mixed overnight. They had steadily declined as concerns about Asia influenced markets. As the day has gone on in London, markets have bounced off the lows, as hopes of ECB action increase.
There was a weak German bund auction. They only sold €3.61 billion out of a maximum of €5 billion. I actually take this as a positive. I have long argued that negative rates in the short end were a sign that currency redenomination risk is high. The weakness of this auction signals that some of that risk has been taken off the table. The difference between German and Italian yields is still high, but I believe the ECB has succeeded in talking down the conversion risk. They still have to deliver, but taking this fear out of the market would be a big step.
If the EU is going to aggressively try to protect Spain and Italy, the “core” countries are going to have to come up with some money. Either directly (unlikely) or through the issuance of EFSF and eventually ESM debt. That is another reason for German yields to tick up and re-couple with those of the periphery. Long EFSF versus short the best components looks like an interesting trade.
Bickering vs Destruction
Maybe the world isn’t so binary, but that is how I currently see the world to a large degree. The ECB can engage in policies that make some parties uncomfortable, or downright angry. They can stretch their mandate, annoy Germany, face complaints about moral hazard, but just possibly negotiate a successful intervention that last long enough for real changes to be implemented in the economy. Often we get bogged down in the minutiae of these arguments and miss the other possible outcome.
Doing nothing likely results in a major sell-off in the markets, break-up of the Eurozone, and a complete standstill of the global economy as companies and individuals try and figure out what any of this means. In the past I have preferred taking immediate pain. I thought we should have had more Lehman’s or nationalizations. I thought Greece should have been allowed to default. My view has changed because over the past 2 years in Europe, policies have made the entire system more connected. Rather than creating firewalls, the policies have encouraged connectivity and linkages at an unprecedented rate. That coupled with dissolution of the euro is too much for the system to take. The weakness in China and the problems in the U.S. economy make it especially hard to take the risk of a euro break-up right now.
So, if the real choice is risking destruction or depression, versus some bickering, I would take bickering any day. I think the ECB and many leaders see that same outcome at the end of the day.
Markets vs Economies
The markets seem happy to be teased by central bankers. We seem to have hit a period where any disappoint from the central banks is instantly reversed with hopes that they will deliver at the next opportunity.
The economies have failed to see it that way. There is noticeable deterioration across most economies, including, Germany. While the politicians squabble and the central bankers dawdle, the economies have been getting worse.
The actions have to be taken for the economy not the markets. Hopefully the central bankers and politicians can see that their delays are causing problems for the real world. Economies are getting worse because no plan is being put in place, which only increases the final cost.
It is time to act now as the delays are just too costly.
Apple vs The World
The U.S. now has a record number of people on food stamps. China is looking at stimulus because they are in the midst of a hard landing. Europe is considering entering the money printing phase in a big way because their economies are a mess. Even at home, the Fed is considering more stimulus because the economy is showing signs of weakness.
Yet, in the midst of that turmoil, a product announcement can spark a rally in the biggest company in the world? That doesn’t seem right. I wouldn’t normally care, except that Apple has become so big that its influence on U.S. equity indices can’t be ignored.
My main reason for disliking Apple at these levels is that so many bears seem to have piled into it, as a last refuge. As the one stock they could get comfortable holding. But yesterday’s movement struck me as more bizarre than that. I have read many of the arguments about why Apple is cheap, but even then it looks to me like profits for I-phone 6, I-phone 7, I-phone 8, I-pad 3, I-pad 4, I-TV, etc have to be built in at least a little. Moving so much on an invitation for a product launch everyone is already expecting seems to have signs of a bubble.
It is certainly one of the reasons I am biased to being long outside of the U.S., though right now, I’m looking at getting long across the globe, for what I expect to be another big round of policy induced rallies.
Copyright © TF Market Advisors
Weekly Select SPDR Review (Vialoux)
Thursday, September 6th, 2012
by Don Vialoux, Tech Talk
Weekly Select Sector SPDR Review
Technology
· Intermediate trend is up. Resistance has formed at $30.96.
· Units remain above their 20, 50 and 200 day moving averages.
· Short term momentum indicators are trending down.
· Strength relative to the S&P 500 Index remains positive.
Materials
· Intermediate trend is up. Resistance has formed at $36.63.
· Units remain just above their 50 and 200 day moving averages and below their 20 day moving average.
· Short term momentum indicators are trending down.
· Strength relative to the S&P 500 Index remains neutral, but showing signs of turning negative.
Consumer Discretionary
· Intermediate trend is up.
· Units trade above their 20, 50 and 200 moving averages
· Short term momentum indicators are overbought.
· Strength relative to the S&P 500 Index remains positive.
Industrials
· Short and intermediate trend is up. A bearish key reversal was recorded on August 21st. Resistance has formed at $37.39
· Units remain above their 50 and 200 day moving average and below their 20 day moving averages.
· Short term momentum indicators are trending down.
· Strength relative to the S&P 500 Index turned from positive to negative.
Energy
· Short and intermediate trend is up. Resistance has formed at $73.03.
· Units remain above their 50 and 200 day moving averages and below their 20 day moving average.
· Short term momentum indicators are trending down.
· Strength relative to the S&P 500 Index has changed from positive to negative.
Financials
· Short and intermediate trend is up. Resistance has formed at $15.38.
· Units trade above their 20, 50 and 200 day moving averages.
· Short term momentum indicators are trending down.
· Strength relative to the S&P 500 Index remains neutral, but is showing signs of turning positive.
Consumer Staples
· Short and intermediate trend is up. Resistance has formed at $36.00. A bearish key reversal signal was recorded on August 21s .
· Units remain above their 50 and 200 day moving averages and below their 20 day moving average.
· Short term momentum indicators are trending down.
· Strength relative to the S&P 500 Index has been negative, but is showing signs of change.
Health Care
· Short and intermediate trend is up. Units touched an all-time high yesterday.
· Units remain above their 20, 50 and 200 day moving averages.
· Short term momentum indicators are neutral.
· Strength relative to the S&P 500 Index has been negative, but has turned positive.
Utilities
· Intermediate trend is down. Next support is at $36.00.
· Units remain below their 20 and 50 day moving averages, but remain below their 200 day moving average.
· Short term momentum indicators are oversold, but have yet to show signs of bottoming.
· Strength relative to the S&P 500 Index remains negative.
Special Free Services available through www.equityclock.com
Equityclock.com is offering free access to a data base showing seasonal studies on individual stocks and sectors. The data base holds seasonality studies on over 1000 big and moderate cap securities and indices.
To login, simply go to http://www.equityclock.com/charts/
Following is an example:
Canadian Tire Corporation Limited (TSE:CTC) Seasonal Chart
Disclaimer: Comments and opinions offered in this report at www.timingthemarket.ca are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed.
Don and Jon Vialoux are research analysts for Horizons Investment Management Inc. All of the views expressed herein are the personal views of the authors and are not necessarily the views of Horizons Investment Management Inc., although any of the recommendations found herein may be reflected in positions or transactions in the various client portfolios managed by Horizons Investment Management Inc
Horizons Seasonal Rotation ETF HAC September 5th 2012
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Tags: Canadian, Canadian Market, ETF, ETFs, Indices, Seasonal, Seasonal Trades, Seasonality, Technology, Vialoux
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