Friday, June 8th, 2012
The charts below show the relative strength of the ten S&P 500 sectors as well as the Dow Jones Transports relative to the S&P 500 over the last year. When the line is rising it indicates that the sector is outperforming the S&P 500, while a falling line indicates underperformance. We have also shaded each sector in red or green to indicate whether the sector has outperformed (green) or underperformed (red) the S&P 500 over the last year.
As shown in the chart, six sectors have outperformed the S&P 500 over the last year. Over the last twelve months, the S&P 500 has been led essentially by Consumer Discretionary, Technology, and Utilities, which have seen the greatest outperformance. On the downside, sectors that have been weighing on the market include Energy, Financials, Industrials, and Materials. Of these four sectors, the Materials sector has shown some signs of a bounce in recent days, but at this point we would need to see further outperformance before becoming more confident on the sector’s outlook.
With regards to the Dow Jones Transports, the sector has underperformed the S&P 500 over the last year, but in the last several weeks the sector’s relative strength has been slowly trending higher. This is no doubt due to the big drop in the price of oil, but for all you Dow theorists out there, it is a bullish trend.
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Tags: Amp, Bounce, Bullish Trend, Dow Jones, Downside, Industrials, Investment Group, Materials Sector, Nbsp, No Doubt, Outlook, Outperformance, Price Of Oil, Relative Strength, Sectors, Shaded Red, Signs, Theorists, Twelve Months
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Wednesday, April 25th, 2012
For Apple 2012 started with almost the same growth as 2011 started. Q1 2011 saw earnings growth of 92% and Q1 2012 saw growth of 94%. As the following revenue growth table shows, the pattern for the last twelve months has been very consistent:
Here are some notes:
- The iPad is growing at a faster rate than the iPhone and has achieved in two years what the iPhone took four.
- The iPhone grew units at nearly 90% and revenues at 85%. This is slightly below the quarterly average over the last two years of 99%
- The Mac showed significant weakness though the previous year’s Q1 had exceptionally high growth of 32%. The Mac still grew faster than the market and therefore gained share
- The iPod is declining consistently. Units showed a lesser decline than revenues as the average price dropped from $164 to $157.
- The iTunes store continues to grow very rapidly, reaching a new record level above $2.1 billion revenues
- Peripherals were weak with 11% growth but that may have something to do with lowered Mac sales
- Software had good quarter though not exceptional
- The top line grew at nearly 60% which is not exceptional but the bottom line grew at 94% which is above average
Overall, the company had a very good quarter and showed consistency, which, incidentally, implies predictability. The following graph shows the top and bottom lines in historical context with color coding matching the table above.
Tags: Bottom Line, Bottom Lines, Color Coding, Consistency, Earnings Growth, First Quarter, Graph, Historical Context, Ipad, Iphone, Itunes, Mac Sales, Peripherals, Predictability, Previous Year, Q1, Sales Software, Scorecard, Twelve Months
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Monday, January 24th, 2011
Although the silver price has declined by 11% over the past three weeks, tightness in the physical market continues as the metal is again in backwardation, i.e. the spot price is higher than the futures price.
James Turk of GoldMoney provided the following comments to King World News: “Silver is in backwardation which is an extremely important development. Backwardation happens regularly in most commodities, but it is rare in the precious metals.”
“Silver is in backwardation not just in the short-term, this time it is extending twelve months forward! The last time this happened Eric was in January of 2009. Over the next few weeks silver rose from about $10.50 to $14.50, a roughly a 40% move higher. The key to understanding backwardation is that the price must rise to entice holders of physical metal to sell and accept a national currency in return. I think we can expect a similar event to repeat over the next few weeks.
“A similar type of move would clearly put silver well above its previous high. What this backwardation shows is that there is a disconnect between the physical and the paper markets in silver. As I said previously, the silver shorts simply cannot hold the paper price down here any longer without seriously discrediting the paper silver market as a price discovery mechanism.”
Also, Goldcore alerted us to another positive development in the silver market, reporting a massive increase in silver bullion demand from China, with the country’s imports surging fourfold in 2010. As on so many other fronts, China is turning out to be a game changer.
Source: Goldcore, January 21, 2011.
Tags: Backwardation, China, Commodities, Currency, Discovery Mechanism, Futures Price, Game, Gold, Goldmoney, James Turk, Last Time, Massive Increase, National Currency, Paper Markets, precious metals, Price Discovery, Silver, Silver Bullion, Silver Market, Silver Price, Silver Shorts, Twelve Months, World News
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Thursday, September 16th, 2010
by Asha Bangalore, Northern Trust
The Bank of Japan has intervened today, September 15, 2010, to bring down the value of the yen. The official quote for the yen on September 14 is 83.05; the yen traded close to this range last in 1995 and the lowest mark is 81.12 yen per dollar on April 19, 1995. A weak yen is necessary to boost exports and promote growth, particularly in the current shaky economic situation in Japan. What is historical record of central bank interventions being successful? It is widely accepted that foreign exchange interventions are not successful in the long run. The yen has risen 9.5% and 23%, respectively, vis-à-vis the dollar and the euro in the past twelve months. Today’s intervention has resulted in a temporary reduction in the value of the yen. As of this writing, the yen was trading at 111.34 per euro and 85.56 per dollar.
We are not experts of the foreign exchange market. We would like to share with you a study about the Bank of Japan’s previous interventions (Coordinated Currency Interventions Temporarily Move Exchange Rates) which has a noteworthy conclusion. The authors of this study indicate that the Bank of Japan was successful in bringing about a temporary reduction of the value of the yen when it was a coordinated effort of more than a $1 billion, while single-handed interventions have been successful only 60% of the time. Today’s actions of the Bank of Japan is most likely not a one-off event, stay tuned for updates.
Motor Vehicle Output Trims Headline, Other Details Present a Moderate Performance
Industrial production increased 0.2% in August, after a downwardly revised 0.6% jump in July (previously reported as a 1.0%) increase. The headlines of both July and August were partly dominated by swings in auto production (+9.5% in July and -5.0 in August). These wide movements resulted from atypical production gains in July as auto plants were not shutdown for retooling in the summer.
Factory production also moved up 0.2% in August vs. a 0.7% gain in July, reflecting a downward revision. Excluding autos, factory production rose 0.5% in August after a 0.2% increase in the prior month. On a year-to-year basis, both total factory production and factory production excluding autos show gains, with a small moderation in place (see chart 2)
Outside of autos, production of furniture and related products fell 1.8% in August but posted a 2.2% increase from a year ago. Several components — wood products, primary metals, fabricated metal products, and electrical equipment, appliances, and components — showed noticeable gains of at least 1.0% during August and more than offset the drop in auto and furniture output. The operating rate of nation’s industries was 74.7% in August, up one notch from July. The factory capacity utilization rate was 72.2% in August, which is roughly 7 percentage points below the long-term average.
The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.
Copyright (c) Northern Trust
Tags: April 19 1995, Auto Plants, Auto Production, Bangalore, Bank Of Japan, BRIC, BRICs, Currency Exchange, Currency Interventions, Economic Situation, Exchange Rates, Foreign Exchange Market, Japan Currency, Moderate Performance, Motor Vehicle, Northern Trust, Swings, Time Today, Trims, Twelve Months, Yen
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Thursday, October 1st, 2009
This post is a guest contribution by Puru Saxena*, founder of Hong Kong-based Puru Saxena Wealth Management.
On one hand, the deflationists are claiming that given the extremely high debt levels in the West, further inflation is impossible. On the other side of the argument, many proponents of inflation are calling for Zimbabwe style hyperinflation. In this business, everyone is entitled to their opinion; however it is my contention that we will get neither deflation nor hyperinflation. If my assessment is correct, once business activity picks up, our world will have to deal with high inflation.
Although I have great sympathy for the deflation crowd, given the reckless attitude of the central bankers and their ability to create debt-based money, I do not believe deflation (contraction in the supply of money and total debt) is very likely.
For sure, in this post-bubble environment, American consumer debt continues to contract, but this is being more than offset by the expansion in federal debt. Over the past year alone, federal debt in America has surged from US$9.645 trillion to US$11.813 trillion. In other words, during the past twelve months, American federal debt has risen by a shocking 24.47% and it now stands at 83.52% of GDP! Now, given the ability of the American establishment to essentially create dollars out of thin air, I have no doubt in my mind that it be able to inflate the economy. However, this will come at a huge cost and the victim will be the American currency.
In fact, the recent weakness in the US dollar is a sign that central- bank sponsored inflation has started to dominate the private-sector debt contraction in the West. Furthermore, over the past few weeks, various governments have issued US dollar-denominated debt and this suggests that the carry-trade is back in vogue. In a startling move, Germany recently announced that it plans to borrow money in US dollars!
Now, given the ongoing federal debt inflation, debasement of paper currencies, sky-high budget deficits and competitive currency devaluations, the macro-economic environment has never been better for precious metals. Yet, both gold and silver continue to frustrate the bulls by staying below the record-highs recorded in spring 2008.
So, what is going on here? Have we already seen the end of the precious metals bull-market or are we about to witness an explosive rally? Before I attempt to answer this question, I want to make it clear that even though gold failed to better its all-time high during last autumn’s panic, it was the only asset, (apart from US Treasuries) which stayed relatively firm. And looking at the various markets today, gold is the only asset that is flirting with its all-time high. So, whether you like it or not, gold deserves some credit for fulfilling its role as a safe haven.
Now, unlike some of the die-hard gold bugs, I don’t believe that gold is the ultimate asset to own at all times. Without a doubt, there have been times in history when gold has proven to be a lousy investment. For instance, between 1980 and 2001, the nominal price of the yellow metal fell by an astonishing 70%. This horrible price action spawned an entire generation who grew up hating gold and up until a few years ago, the vast majority considered gold a barbaric relic.
However, during other periods in history, when macro-economic uncertainty was high and inflationary expectations were running out of control, gold turned out to be a fantastic asset to own.
If my take on the macro-economic situation is valid, then we are in such a period now and gold must form a part of every investment portfolio.
You may remember that over the past year, central banks have injected trillions of dollars into the banking system and it is only a matter of time before inflationary expectations start spiraling out of control. Up until now, this ’stimulus’ money hasn’t permeated through the economy in the West but once money velocity picks up, prices will start rising and the investment community will become very concerned about inflation. When the deflation scare abates and people start protecting the purchasing power of their savings, capital will start to flow towards precious metals.
Long-term clients and subscribers will recall that about two years ago, I highlighted gold’s tendency to rocket higher every other year. Figure 1 captures this trend perfectly and you can see that since the outset, gold’s bull-market has been punctuated by lengthy consolidations and the yellow metal has surged to a new high every alternate year.
Figure 1: Is gold about to shine?
So, if gold remains in a bull-market and its trend consistency is intact, its price should surge over the following months. Conversely, if the price of gold fails to climb above its all-time high before year-end, it should start to ring alarm bells as this would open up the possibility that the bull-market may be over. Remember, certainty does not exist in the investment world and savvy investors should remain open to all outcomes.
Now, given the uncertainty in the world today and the ticking inflationary time-bomb, my view is that gold will soon embark on its north-bound journey. So, I suggest that investors hold on to gold and the related mining companies which will probably continue to perform well until next spring.
As far as silver is concerned, it has always been a high-beta play on the direction of gold. If the next up leg in gold’s bull-market materializes, the price of silver will also head towards the heavens. Accordingly, investors may also want to allocate a portion of their investment portfolio to silver bullion and silver producing companies.
Source: The Daily Reckoning, September 29, 2009.
* Puru Saxena is the founder of Puru Saxena Wealth Management. He is a registered investment advisor and money manager with the SFC of Hong Kong. Saxena conducts in-depth macro-economic research, formulates his firm’s investment strategy and manages discretionary investment portfolios. He is also the editor and publisher of Money Matters – a monthly economic report he has been writing since 2000.
Tags: American Currency, Business Activity, Carry Trade, Consumer Debt, Contention, Contraction, Debasement, Debt Levels, Deflation, Doubt In My Mind, Federal Debt, Gold, Gold Bullion, Hyperinflation, inflation, No Doubt, Paper C, Proponents, Thin Air, Twelve Months, Vogue, Wealth Management
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Friday, January 25th, 2008
Jan. 25, 2008 – Today, we received this piece about Breakingviews.com’s new SWF Risk Index:
To see the full index with detailed rankings, click on the link below
Sovereign Wealth Fund Index: Sovereign wealth funds were hardly talked about twelve months ago. Now they are one of the hottest topics in global financial markets. Over the last year, these state-owned entities have spent over $75bn snapping up stakes in some of the world’s biggest banks, taken big positions in stock exchanges on both sides of the Atlantic and even attempted a takeover of one of Britain’s leading supermarkets.
Such funds have existed for decades, but the shift in global economic power and the current weakness in western markets has given SWFs – forecast to grow assets fivefold to $13.4tr by 2017 – new influence and raised new fears about their motives. Critics such as President Sarkozy of France and some US politicians worry that SWFs tend to be secretive, target political as well as financial returns, and operate at the whim of governments not always sympathetic to western economic and political interests…
Tags: Banks, Biggest Banks, Brazil, Breakingviews, BRICs, China, Economic Power, Emerging Markets, France, Fund Index, Fund Risk, Galani, Global Financial Markets, Markets, Miscellaneous, Motives, Nixon, Political Interests, risk, Risk Index, Russia, Sarkozy, Stock Exchanges, Supermarkets, Swf, SWFs, Takeover, Target, Twelve Months, Western Markets, Whim
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