CNBC's Jim Cramer says he's witnessing something in the market he hasn't seen in all his 34 years of investing - something that tells him this bull market is more powerful than any we've ever experienced. First, investors aren't taking profits after good news, which is usually the norm. Second, stocks aren't re-tracing to fill in any gaps after popping on good news, they just keep going higher. Lastly, even on bad news, stocks are roaring even higher. This is a "surrealist moment," Cramer says. Managers who have been taught never to chase stocks are getting killed. This is bull is "crushing even the most skilled of matadors." (Video) [View news story]
On the contrary, I think we are witnessing something we have seen many times last..ummm...12 years: irrationally exuberant Cramer making a bad emotional call or in his own immortal words: "No, no, no! The Bear Sterns is fine! Don't take your money out!"
The market actually feels a lot like the Spring of 2011 - the news were getting worse but the stock prices kept on creeping up. It was a great time to buy...4 month later and 20% lower.
There Are Even Bigger Problems In The Reinhart And Rogoff Thinking [View article]
>> Why do you think the banks would offer 10%?
Because one will move money to a bank or an asset yielding more in any other country. Banks need deposits to function. Printing money to replace deposits will result in hyper inflation as people will start buying up anything in sight with the withdrawn money that is not paper.
The Fed can increase the real rates more or less but it CANNOT LOWER them too much below inflation. The real rates cannot be significantly negative without capital controls. The money will just flee elsewhere.
I think Bernanke plays a bad hand the best way he can but you and the author are just totally sanguine about the real risk of what the Fed is doing.
There Are Even Bigger Problems In The Reinhart And Rogoff Thinking [View article]
Charlie,
It seems that you are just want to argue without really making a different point from me. I clearly stated that inflation is a choice between inflation and default. Fed has clearly lost control of inflation in the 70's (over 14% in 1980) by trying to stimulate the economy and ending up with the stagflation. It took a severe recession, bras balls of Paul Volker, over 10% unemployment, and several years of misery to get inflation under control. It's preposterous to think that Fed has a full control of real rates.
I can give you another dozen of examples but this one should suffice.
Finally, taking it to an extreme scenario. Let's assume CPI at 14%, t-bills rates at 1% (QE12 or so), and short term savings deposit rates at 10%. Do you think a primary dealer like JP Morgan can afford to keep bonds on the books at, say, -13% real rates (think Argentina today) and finance it with the depositors money at real rates at 10%? Care to explain how it can possibly work without the bank being nationalized?
There Are Even Bigger Problems In The Reinhart And Rogoff Thinking [View article]
I meant coordination when the treasury is issuing bonds and the fed is buying bonds.
"Market", supply/demand for money, economy is all the same thing - not sure if semantics matter.
The primary dealers are "dealers", they are not the ultimate buyers. I suppose the Fed could try to blow them up by force feeding bonds with negative real rates as they'll no one to re-sell these bonds too (I am not certain if they can legally refuse). This would simply cause another banking crisis as they would become insolvent.
Central banks lost control of inflation many times if you look beyond 20-30 years in the past so I am not sure what you mean "by logical reasons". It has happened literally hundreds of times before.
There Are Even Bigger Problems In The Reinhart And Rogoff Thinking [View article]
Cullen, I disagree with your thesis or I didn't understand your article. The Fed coordinated with treasury has only full control of nominal rates, the real post-inflation bond rates are set by the market. At some point the Fed may lose control of inflation and the currency because the Fed will be the only remaining buyer if the bonds real rates will become sufficiently negative. This will result in a circle of money printing to buy bonds to issue more bonds to cover interest payments to issue more money to buy them, etc.
I expect this will happen in Japan under "Abenomics" once the public realizes that the inflation picked up and the real rates are negative. With no one left to buy the bonds, except the central bank, will create a tough choice between defaulting on bonds or inflating away your debt.
One day (hopefully, not any time soon), the gold bugs may be right. After all, there's never been a free lunch in economics.
Amazon (AMZN -6.9%) is giving back most of its 2013 gains as the Street decides a revenue miss and light profit guidance outweigh a still-improving gross margin. Slowing growth and a lack of profits for the international ops is a concern for many, even if forex is a factor - international media sales rose only 1% Y/Y, though other merchandise sales rose 28%. On the earnings call, management admitted (echoing eBay) "there is some [international] softness from a macro standpoint," while adding Amazon is investing heavily in China, Italy, and Spain. Nomura is staying bullish, touting the fact total growth is holding steady. [View news story]
I don't think any sane person needs an excuse to sell Amazon. Owning it as a "long-term investment" is inexcusable though.
Sell-side analysts are probably furiously fudging their Excel models to somehow find "strong free cash flow" in year 2025 which will justify their price targets.
Did anyone notice that Amazon started actually burning money now once you include their CapEx spend and did anyone actually bother to look at "comprehensive income " statement to see that Amazon did not really earn any money at all last quarter (once you adjust foreign cash to US exchange rates)?
Amazon.com (AMZN): Q1 EPS of $0.18 beats by $0.09. Revenue of $16.07B (+22% Y/Y) misses by $90M. Expects Q2 revenue of $14.5B-$16.2B vs. $15.9B consensus. Expects Q2 operating income of -$340M to +$10M; EPS consensus is at $0.22. Shares +1.4% AH. CC at 5PM ET (webcast). (PR) [View news story]
P.S. Hint: read "comprehensive income" section - they really only earned $2M. There was no real earning beat, at least not from better operations.
More on Amazon: Gross margin +260 bps Y/Y to 26.6% (it rose 340 bps Y/Y in Q4 to 24.1%). North America sales growth up to 26% Y/Y in Q1 (23% in Q4), international down to +16% (21% in Q4), hurt by forex. 58/42 split between NA and international sales. Media sales +7% (+8% in Q4) and 31% of total, electronics/other merchandise +28% (same as Q4) and 64% of total. "Other" NA revenue (mostly AWS) +64% to $750M. Fulfillment spend +39% (+36% in Q4), marketing +32% (+43% in Q4), technology/content +46% (+56% in Q4) - all 3 rates are still soundly above rev. growth. Free cash flow for last 12 months is $1.58B (exc. HQ purchase). AMZN +2.2% AH. (PR) [View news story]
Something is funny in comprehensive income statement:
Foreign currency translation adjustment: -$78M. They only earned $2M after the currency adjustment. Need to see 10Q to understand if a stronger dollar helped them reduce their foreign liability or some other one-off that helped. And of course, they got a tax benefit of $18m since they lost money last year.
Amazon.com (AMZN): Q1 EPS of $0.18 beats by $0.09. Revenue of $16.07B (+22% Y/Y) misses by $90M. Expects Q2 revenue of $14.5B-$16.2B vs. $15.9B consensus. Expects Q2 operating income of -$340M to +$10M; EPS consensus is at $0.22. Shares +1.4% AH. CC at 5PM ET (webcast). (PR) [View news story]
Old story. The revenue and guidance missed, the stock is up. I don't read much in "earnings beat" (let's see how they arrive at it), the guidance is now for a loss in Q2 vs. expected profit (-$0.36 vs. $0.22 a share!), which means further revisions down in yearly EPS. They may end losing money again in 2013.
Shouldn't they just declare bankruptcy so the stock can skyrocket to $1,000 a share?
Thomas, I was about to make the same point but you beat me to it. Totally agree, the marginal cost of production doesn't define the price of gold unlike those of commodities which are immediately used.
Analyzing Why BHP Billiton's American Depositary Receipts Trade At Different Prices [View article]
Very good article. Unfortunately, the premium itself is not high enough to make a pair trade profitable: 18% (premium) * 3.41% (div) = 0.62%, assuming the premium will persist due to tax differences. A small gain in dividend differential will be cancelled by transaction costs.
As a side note, LTCM had a huge pair trade in 1998 on Royal Dutch Shell listed in London and Amsterdam. The premium increased instead of shrinking and LTCM had to take a huge loss:
Amazon's Revenue Deceleration Probably Continued [View article]
>> intrinsic bias to paint the numbers as rosy as possible
Channel Advisor clearly has a dog in this race. It's a middle-man between a seller and various e-commerce sites, helping sellers optimize sales via Amazon, eBay, etc. CA function is not that much different from a real estate broker.
Therefore, this report is a bit like NAR existing home sales reports: the numbers are objective, the commentary ("analysis") is not.
I am pretty pessimistic of Australian long-term outlook. Australia has no economy of note left outside of mining sector, which is now slowing down. For example, their strong currency put Yellow Tail and other wine makers on a verge of bankruptcy.
By the way, their banking system is not in a good shape at all. Australia has a tremendous household debt, undercapitilized banks (look at load to deposit ratios), grossly overpriced real estate, and probably a large chunk of construction and industrial loans about to go bad to the mining sector.
CNBC's Jim Cramer says he's witnessing something in the market he hasn't seen in all his 34 years of investing - something that tells him this bull market is more powerful than any we've ever experienced. First, investors aren't taking profits after good news, which is usually the norm. Second, stocks aren't re-tracing to fill in any gaps after popping on good news, they just keep going higher. Lastly, even on bad news, stocks are roaring even higher. This is a "surrealist moment," Cramer says. Managers who have been taught never to chase stocks are getting killed. This is bull is "crushing even the most skilled of matadors." (Video) [View news story]
The market actually feels a lot like the Spring of 2011 - the news were getting worse but the stock prices kept on creeping up. It was a great time to buy...4 month later and 20% lower.
There Are Even Bigger Problems In The Reinhart And Rogoff Thinking [View article]
Because one will move money to a bank or an asset yielding more in any other country. Banks need deposits to function. Printing money to replace deposits will result in hyper inflation as people will start buying up anything in sight with the withdrawn money that is not paper.
The Fed can increase the real rates more or less but it CANNOT LOWER them too much below inflation. The real rates cannot be significantly negative without capital controls. The money will just flee elsewhere.
I think Bernanke plays a bad hand the best way he can but you and the author are just totally sanguine about the real risk of what the Fed is doing.
There Are Even Bigger Problems In The Reinhart And Rogoff Thinking [View article]
It seems that you are just want to argue without really making a different point from me. I clearly stated that inflation is a choice between inflation and default. Fed has clearly lost control of inflation in the 70's (over 14% in 1980) by trying to stimulate the economy and ending up with the stagflation. It took a severe recession, bras balls of Paul Volker, over 10% unemployment, and several years of misery to get inflation under control. It's preposterous to think that Fed has a full control of real rates.
I can give you another dozen of examples but this one should suffice.
Finally, taking it to an extreme scenario. Let's assume CPI at 14%, t-bills rates at 1% (QE12 or so), and short term savings deposit rates at 10%. Do you think a primary dealer like JP Morgan can afford to keep bonds on the books at, say, -13% real rates (think Argentina today) and finance it with the depositors money at real rates at 10%? Care to explain how it can possibly work without the bank being nationalized?
There Are Even Bigger Problems In The Reinhart And Rogoff Thinking [View article]
"Market", supply/demand for money, economy is all the same thing - not sure if semantics matter.
The primary dealers are "dealers", they are not the ultimate buyers. I suppose the Fed could try to blow them up by force feeding bonds with negative real rates as they'll no one to re-sell these bonds too (I am not certain if they can legally refuse). This would simply cause another banking crisis as they would become insolvent.
Central banks lost control of inflation many times if you look beyond 20-30 years in the past so I am not sure what you mean "by logical reasons". It has happened literally hundreds of times before.
There Are Even Bigger Problems In The Reinhart And Rogoff Thinking [View article]
I disagree with your thesis or I didn't understand your article. The Fed coordinated with treasury has only full control of nominal rates, the real post-inflation bond rates are set by the market. At some point the Fed may lose control of inflation and the currency because the Fed will be the only remaining buyer if the bonds real rates will become sufficiently negative. This will result in a circle of money printing to buy bonds to issue more bonds to cover interest payments to issue more money to buy them, etc.
I expect this will happen in Japan under "Abenomics" once the public realizes that the inflation picked up and the real rates are negative. With no one left to buy the bonds, except the central bank, will create a tough choice between defaulting on bonds or inflating away your debt.
One day (hopefully, not any time soon), the gold bugs may be right. After all, there's never been a free lunch in economics.
Amazon (AMZN -6.9%) is giving back most of its 2013 gains as the Street decides a revenue miss and light profit guidance outweigh a still-improving gross margin. Slowing growth and a lack of profits for the international ops is a concern for many, even if forex is a factor - international media sales rose only 1% Y/Y, though other merchandise sales rose 28%. On the earnings call, management admitted (echoing eBay) "there is some [international] softness from a macro standpoint," while adding Amazon is investing heavily in China, Italy, and Spain. Nomura is staying bullish, touting the fact total growth is holding steady. [View news story]
Sell-side analysts are probably furiously fudging their Excel models to somehow find "strong free cash flow" in year 2025 which will justify their price targets.
Did anyone notice that Amazon started actually burning money now once you include their CapEx spend and did anyone actually bother to look at "comprehensive income " statement to see that Amazon did not really earn any money at all last quarter (once you adjust foreign cash to US exchange rates)?
Amazon.com (AMZN): Q1 EPS of $0.18 beats by $0.09. Revenue of $16.07B (+22% Y/Y) misses by $90M. Expects Q2 revenue of $14.5B-$16.2B vs. $15.9B consensus. Expects Q2 operating income of -$340M to +$10M; EPS consensus is at $0.22. Shares +1.4% AH. CC at 5PM ET (webcast). (PR) [View news story]
More on Amazon: Gross margin +260 bps Y/Y to 26.6% (it rose 340 bps Y/Y in Q4 to 24.1%). North America sales growth up to 26% Y/Y in Q1 (23% in Q4), international down to +16% (21% in Q4), hurt by forex. 58/42 split between NA and international sales. Media sales +7% (+8% in Q4) and 31% of total, electronics/other merchandise +28% (same as Q4) and 64% of total. "Other" NA revenue (mostly AWS) +64% to $750M. Fulfillment spend +39% (+36% in Q4), marketing +32% (+43% in Q4), technology/content +46% (+56% in Q4) - all 3 rates are still soundly above rev. growth. Free cash flow for last 12 months is $1.58B (exc. HQ purchase). AMZN +2.2% AH. (PR) [View news story]
Foreign currency translation adjustment: -$78M. They only earned $2M after the currency adjustment. Need to see 10Q to understand if a stronger dollar helped them reduce their foreign liability or some other one-off that helped. And of course, they got a tax benefit of $18m since they lost money last year.
All in all, looks like a fake earning beat.
Amazon.com (AMZN): Q1 EPS of $0.18 beats by $0.09. Revenue of $16.07B (+22% Y/Y) misses by $90M. Expects Q2 revenue of $14.5B-$16.2B vs. $15.9B consensus. Expects Q2 operating income of -$340M to +$10M; EPS consensus is at $0.22. Shares +1.4% AH. CC at 5PM ET (webcast). (PR) [View news story]
Shouldn't they just declare bankruptcy so the stock can skyrocket to $1,000 a share?
How Low Can Gold Go? [View article]
Score 5.5% Yields With Short-Term Caterpillar Bonds In Russian Rubles [View article]
Beware Of 'Analysts' Assisting Pump And Dump Schemes [View article]
Add Red Chip to the list. They cut their teeth promoting Chinese RTO micro-caps.
Analyzing Why BHP Billiton's American Depositary Receipts Trade At Different Prices [View article]
As a side note, LTCM had a huge pair trade in 1998 on Royal Dutch Shell listed in London and Amsterdam. The premium increased instead of shrinking and LTCM had to take a huge loss:
http://buswk.co/YcY9ou
Amazon's Revenue Deceleration Probably Continued [View article]
Channel Advisor clearly has a dog in this race. It's a middle-man between a seller and various e-commerce sites, helping sellers optimize sales via Amazon, eBay, etc. CA function is not that much different from a real estate broker.
Therefore, this report is a bit like NAR existing home sales reports: the numbers are objective, the commentary ("analysis") is not.
Downgrading Down Under [View article]
By the way, their banking system is not in a good shape at all. Australia has a tremendous household debt, undercapitilized banks (look at load to deposit ratios), grossly overpriced real estate, and probably a large chunk of construction and industrial loans about to go bad to the mining sector.
Bank-wise, Australia 2013 = US 2007.