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.

Sphere: Related Content

Cadbury

We have an unusual chart about what the market is thinking about the 16 bln USD cash and stock offer from Kraft for Cadbury. The credit default swap spread for Kraft in the 5 years is jumping. A normal reaction to new that an already indebted company plans to load his balance sheet with even more debt. This spread will only widen because Kraft will be pushed to sweeten the offer or to tolerate another bidder.

Who could that be? The CDS market gambles on Hershey rather than on Nestlé, even though Nestlé has seen as the most viable alternative bidder.
Intriguing.

Sphere: Related Content

Dollar and stocks: any logic?

Stock market and dollar act completely uncoupled now. The dollar we measure through the DXY ETF. Some-one should tell these computers they have to go the other way around.

Sphere: Related Content

Flu

Every year it’s time for our shot to protect us against flu.
Ok, even as the flu infects every year 10%-20% of the world population and kills around 500.000 people again and again, no one takes this stuff to seriously.
However, maybe this time it’s different.
Because Mexican flu is still hanging around, this year’s flu could be particularly tricky.
The big pharma companies will see sales increases. Big vaccine makers like GlaxoSmithKline could generate additional revenue due to this phenomenon. But unfortunately it will prove not to be substantial for their 40 bln USD budget.
Smaller companies where flu vaccine sales make up a large portion of total revenue however, can profit handsomely.
Take Dutch biotech company Crucell (ticker: CRXL), the seventh largest vaccine maker in the world. There are estimations sales could translate in an extra 40 million USD in revenue. Nice for a company with 400 mnl USD in sales.
Nice…

Sphere: Related Content

Monday, mergermania and gold

Two big mergers are hitting the newslines. BJ Services (ticker: BJS) is being acquired by Baker Hughes and Marvel entertainment (ticker: MVL) is merging with Disney (ticker: DIS). Now look to DreamWorks Animation (ticker: DWA) for secondary action.

All major US Exchanges will be closed next Monday for Labor Day.

We’re looking to gold: since February the gold price has been squeezed in an ever tightening range. Sooner or later we will see action coming in this department. The perfect set up for a strangle.

Sphere: Related Content

The 50-day moving average

Most stocks are above their 50-day moving average.
Only two sectors offer some more room for their stocks to catch up with this trend.

And then there is this:

Sphere: Related Content

If you can't beat them...

From the Wall Street Journal

Since Aug. 5 — when we saw names like Fannie, Freddie and AIG reawaken — trading in those three stocks, plus Bank of America and Citi, has averaged about 31.5% of the NYSE consolidated volume. At their peak on Monday, these five stocks accounted for nearly 43% of the NYSE consolidated volume.
AIG is surging day after day. Let me remind you this company was in default in 2008 and required 3 bailouts

Sphere: Related Content

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

Inspiration

In case you were out on Friday, Meredith Whitney was at it again calling for continued bank failures. This time she is calling for some 300 to be the tally. But now Nouriel Roubini is out playing Dr. Doom again with the greater and greater case for more bank failures and for a double-dip recession. Speaking of recessions, the World Health Organization has a swine flu recession scenario out. It may sound a lot like the SARS recession call of 2003 and 2004.

Further:

• S&P 500 at new 2009 high. Up 50% from March closing low.
• Shoemaker Crocs still soaring... at new 52-week high and up 548% from March low.
• Natural gas hits 15-year low relative to "real money," gold.
• Major nanotech play Vecco Instruments at new 52-week high.

Sphere: Related Content

Goldman Sachs ... again

Another negative Goldman Sachs story is emerging. This time it’s the Wall Street Journal shedding light on some practices maintained by the House of Goldman.
It’s Susanne Craig who claims the following in the WSJ.

Goldman Sachs Group Inc. research analyst Marc Irizarry’s published rating on mutual-fund manager Janus Capital Group Inc. was a lackluster “neutral” in early April 2008. But at an internal meeting that month, the analyst told dozens of Goldman’s traders the stock was likely to head higher, company documents show.
The next day, research-department employees at Goldman called about 50 favored clients of the big securities firm with the same tip, including hedge-fund companies Citadel Investment Group and SAC Capital Advisors, the documents indicate. Readers of Mr. Irizarry’s research didn’t find out he was bullish until his written report was issued six days later, after Janus shares had jumped 5.8%.


Of course GS gave an explanation

Goldman spokesman Edward Canaday says the tips are “market color” and “always consistent with the fundamental analysis” in published research reports. “Analysts are expected to discuss events that may have a near-term or short-term impact on a stock’s price,” he says, even if that is a different direction from an analyst’s overall forecast. Goldman’s published research reports include a disclosure that “salespeople, traders and other professionals” may take positions that are contrary to the opinions expressed in reports. But the firm doesn’t disclose the trading huddles.The tips usually go to top clients who have expressed interest in having the information and have short-term investment horizons, he says. Goldman doesn’t want to overload other clients with information that isn’t relevant to them, he says. “We are not in the business of serving thousands of retail customers,” he says.

Quod demonstrandum est

Sphere: Related Content

Inspiration

What we see today:

• 10-year yield sliding... Touches one-year low at 3.45%.
• Spot price of natural gas breaks psychologically important $3 level... natural gas ETFs hit new low.
• Sears plummets 12%... Largest U.S. department store chain buckles under pension, store-closing costs.
• S&P 500 basically unchanged in August.

Friends, Buy natural gas.
Now.
While we're off to the pub for a pint of Guinness and some good songs. We deserve it. Enjoy your weekend. Sphere: Related Content

Inspiration

What we see:

• Building products company James Hardie jumps 23% to hit a new high.
• Coffee plunges 9% since August 11.
• Target touches 10-month high... The retailer jumped 8% yesterday after beating expectations.

and deflation in Germany and Canada...
o yes, China lost 4.3% ... again Sphere: Related Content

Why are China stocks coming down?

The Chinese stocks are going down.
Nice.
In the mean time we mention something else: fiscal stimulus has peaked and now the effect becomes visible.
No more candies.
It seems that the government is recollecting the money before somebody used it. Except for short term profits.
Standard Chartered bank is writing:

We run into one of the classic problems with China’s macro-management style: the tyranny of targets. While most economists would be counseling tax cuts and other measures to lighten the load for business, the MoF is doing its level best to hit its 8.2% total revenue target for 2009, causing a fair amount of misery for the corporate sector. Compounding the problem, the targets tend to rise as they are transmitted down to local governments. According to the ‘Economic Observer’, many city and district governments are being asked to hit an 11% y/y revenue target this year, just so that their superiors can be sure to hit their target.

We are not sure to what extent companies are actually paying unpaid taxes — or are just contributing funds from their current revenues out of patriotic duty. There are certainly anecdotal reports of the latter. So while the government wants companies to invest in theory, the funds they need in order to do so are being taken. This is the way China’s stimulus ends. Not with a bang, but with a whimper.

Sphere: Related Content

Inspiration

What do we see?

* Gold testing its 100-day moving average to the downside
* Canadian dollar and the TSX are both seemingly on their way to test their 50-day moving average
* The CRB index and the oil price broke below its 50-day m.a. yesterday
* Another 35 points, or 3.5%, for the S&P 500 to do likewise
* The 10-year Treasury note yield just smashed through its 50-day m.a. and has 20bps to the downside left to test the 100 day m.a.
* The VIX index jumped 15% to 27.89 — last time it was here (July 10), the S&P 500 was sitting at 879 (100 points south of where it closed yesterday)
* Chinese market correcting... down 6% yesterday.
* Metals companies dropping... Alcoa, Freeport-McMoRan, U.S. Steel all lose 6% yesterday on China correction.
* Drug giants Wyeth and Schering-Plough reach new 52-week highs.
* White metal falls 5.5%... Silver is below $14 per ounce. Sphere: Related Content

Inspiration

Good to know:

• Crude oil down more than 4% on Friday.
• Chinese stocks starting to show cracks... big China ETF (FXI) down 7% this month.
• Junior mining stocks surging... Western Copper, L and L, Minatura Gold, Continental Minerals, and Bayou Bend all make fresh highs.
• Cotton falls maximum allowed on Friday after hitting 11-month high earlier in the week.

Sphere: Related Content

Rally

Good to know:

• Coffeehouse Starbucks continues huge rally to reach new 52-week high... up 133% from March low.
• Shoe specialist Crocs hits new 52-week high... up 500% from March low.
• Uranium giant Cameco climbing... up 40% this year.

And there is the weekend. Time to visit the pub and meet the lads. Summertime is calling Sphere: Related Content

Shanghai... amai... amai

Chinese people opened last 660.000 new accounts to speculate in stocks. Now this is going on for weeks. And what happened. The Shanghai Stock Exchange is going down.

Where is the money coming from?
Is loan growth stoking stocks again?
Because more and more people started to doubt that the Chinese economic situation is as rosy as we’re told.

Sphere: Related Content

Moody's

Buffett dumps Moody’s (ticker: MCO).
The sales listed in the latest filing are:
7/20/09… 1,817,000 at $28.7269 average in open market sale.7/21/09… 3,915,100 at $26.9188 average in open market sale.7/22/09… 2,254,200 at $26.6425 average in open market sale

Also other insiders are dumping the stock: National Idemnity, OBH and GEICO. This is not boding well for the future of this rating agency in particular, but people seem to know that something is brewing.

Buffett reduced his stake from 20,2% to 16.98% over the last days.

Sphere: Related Content

Exhausted

We have a chart depicting the diverging index of the NASDAQ. This index indicates the most exhausted uptrend for years. The formula is:

(Day Momentum * 40 Day Momentum)/Variance 40 Day Price Changes

Of course: everyone wants to buy for the projected year end by Goldman Sachs (S&P500 + 15%).

Sphere: Related Content

A small loss is only normal, isn't it?

In the Chinese Business News of June 29 there was an article stating that government aid was funneled into the stock market and in real estate speculation.

Chinese new bank loans worth about an estimated 1.16 trillion yuan ($170 billion) were invested in the stock market in the first five months of this year, citing a government economist. That’s 20 percent of the 5.8 trillion yuan loans banks extended in the period, the Shanghai-based newspaper said, citing Wei Jianing, a deputy director at the macro-economics department of the Development and Research Center under China’s State Council. “Where did it go? It’s undeniable that a portion of the lending may have flowed into stock and real estate markets and triggered the rebound in these two markets,” the former official said at a financial forum in Ningbo city in eastern China.

Now of course, none of such thing happen in Europe or in the States, right?

Sphere: Related Content