Inspiration

This one comes from Dave Rosenberg and resuming perfectly the current environment:

1. This remains a hope-based rally in the equity markets (with strong technicals). What we are seeing transpire is without precedent - the magnitude of the employment slide versus the magnitude of the market advance.

2. Companies have not really been beating their earnings estimates - only the very final estimates heading into the reporting quarter.

3. Valuation is a poor timing device but even on “normalized” trailing 10-year earnings, the S&P 500 is trading near 18x, which is now above the historical average of 16x.

4. All the growth we are seeing globally this year is due to fiscal stimulus.

5. While Mr. Market may be pricing in a fine future for the U.S., but when the 3-month Treasury-bill yield is 13bps north of zero, you know that there are still substantial fundamental imbalances that need to be worked through.

Looking for some ideas?

• S&P 500 hits 11-month high after a 53% surge since March... still 34% below October '07 peak. • Semiconductor rally continues... giants Broadcom, ASML, Marvell, and others make fresh highs.

• Brazil ETF (EWZ) climbs 8.5% so far this month, retests 11-month highs.

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Inspiration

For those on the sidelines these are frustrating times. While every technical indicator is pointing to a highly overbought situation these markets are going higher… and higher…
Well, trees can grow a lot but not into the sky.
For those being long: enjoy the ride but mind your step. And use stops to protect your money.

So what do we see?

• Brazil continues to surge... the commodity-rich country's Bovespa index makes new 52-week high.
• Starbucks keeps climbing... coffee shop rockets to 18-month highs.
• Oil hits 10-month high... recovering economy drives crude near $75. Sphere: Related Content

Emerging markets take a dive

The retreat of the emerging markets is another aspect of the chilling of the equity action as could be observed lately. Have a look to the Indian Fund. First hurdle of the 20-day moving average is taken here.

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Asia leads the US

We live in strange times indeed.
The S&P futures are up another 1.5%. On their way to 820, this is a resistance hurdle of some importance.
What is so strange? It seems that US indexes are following the Asia session instead of the other way around.
The Nikkei is leading, not only the regional stock exchanges but also the US, although there are no particular reasons or drivers.
We also want to mention the squeeze in the final hour on Wall Street yesterday.

And than we have some news from Zimbabwe.
We read in an article that the local authorities are shifting away from the dollar and has chosen instead for the South African Rand as the countries reference currency.
Zimbabwe offers a timeless picture what can happen when the debasement of currency is running out of hand

One of the consequences is that the local stock index is not crashing at first but goes higher instead.
A false positive, as it is called

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I see light, I think....

We are looking back and notice that US-equities had their largest rally since 1938. Since 6th March the S&P has rallied 23.7%. In reshaping the financial landscape, equities as an asset class became very cheap. The current valuations are proving this and we found a chart of Goldman Sachs showing the Equity Risk Premium on an all time high.

We are charmed with what’s happening with BRIC and emerging markets. No bonuses have to be repaid there. Neither corporate jets to be sold. And also these markets are performing well. ALthough a little overbought for the moment.

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With Love... from Russia

Everyone knows the story of the wings of the butterfly in Hong Kong causing a storm in the States. The Wall Street Journal had a story which reminds me of this phenomenon.

"A tiny default by a Russian aircraft-leasing company is sending ripples through the much larger market for the country's debt. The default by Finance Leasing Co. on $250 million of bonds is the first by a Russian state-owned company on foreign debt since the country's 1998 financial meltdown. That is rattling foreign investors, who worry that Russia could allow many more companies to renege on billions of dollars of debt while it grapples with an economic and financial crisis. "It's clear that the capacity and willingness of the government to...provide support to a large number of entities is declining," says Ed Parker, head of emerging Europe sovereigns at Fitch Ratings."

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China on the move?

These are interesting times we live in.
Look at the Baltic Dry Index. This is a benchmark for freight costs for dry bulk commodities such as iron ore, coal and iron and is meticulous collected in the Baltic Exchange in London. On Wednesday this index jumped with almost 15%. Is this a sign of recovery in the raw materials trade?
Shipping brokers are telling that the demand is slowly recovering as Chinese steelmakers buy iron ore again after running down their inventories. The index fell from an all-time high in 2008 of 11.793 points to a December 22-year low of 663 points. It recovered 100% since then.
Two things are important: this is a price-index – nothing to do with volume – and China.
If the Chinese don’t swing, nothing swings.
Even if Obama tells us ‘buy America’, what is there to buy? There is nothing left…. And what is left is too expensive, anyway.

Look to the renko chart of iShares FTSE/Xinhua China 25 (ticker: FXI). It’s moving…

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Russia

What are the intentions of Ukraine in blocking the Russian gas? What started as the annual stand-off seems to be escalating. If it is really Ukrainia refusing of transitting gas to Europe than these girls/boys are playing with fire. Hey, let’s start a major political crisis. Because Russia is certainly feeling the bite. Alfa Bank Research estimates that Gazprom is losing up to 120 million USD a day. No harm done so far, but it can not continue too long. Even more, Russia is losing another 50 million USD per day in forgone export duties.

Bad timing. The Russians are on a full scale currency devaluation to adjust to lower oil prices. The ruble is on a 6 year low versus the dollar with 31.704. The Russian Micex follows the currency and is going down. Not the right time to tease them.

And Ukraine is also feeling the heat as investors are leaving the local stock and other financial markets.

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Another country, another scam

News from India.

The chairman of Satyam Computer Services, one of the biggest IT outsourcing companies of that vast country wrote a letter to his board, offering his resignation. And confessing he was cooking the books for years and inflating margins in order to let the world believe his company was in excellent condition. Now India has his first scam and shares of the company – listed in Mumbai and New York – lost almost 80% of their value. The SENSEX declined with more than 7%.

The interesting thing is that the game started when the global financial crisis struck this planet and lenders started to sell shares of Satyam pledged by the chairman as collateral.
This was done in order to raise money which was injected into the company to cover costs in an attempt to hide away the fictitious cash reserves as a consequence of the inflated margins.

It was like riding a tiger, not knowing when to get off without being eaten, Mr Raju said in his letter.

PricewaterhouseCoopers was Satyam’s auditor.

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