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Michael J. Clark was born and raised in Sinclair, Wyoming. He is a poet, novelist, artist, historian, and market analyst. His fine arts portfolio can be found at the following address: http://www.hoalantrangallery.com/MJC2.htm His writing portfolio can be found at:... More
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Clark's Gate Timing System ©
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TURN OUT THE LIGHTS
  • CGTS Monday 13 July 2009: OH, OH, GREEN SHOOTS SPOTTED IN SINGAPORE 0 comments
    Jul 14, 2009 6:22 AM | about stocks: C, CSUN, KBH, MGM, SMN, SRS, FMCC, FNMA, HOV, PNC

    Clark's Gate Timing System ©
    Monday 13 July 2009

    Who would have guessed it?  Green shoots are sprouting up everywhere in the world now.  The U.S. housing market showed the first evidence of green shoots (which have since, apparently, turned brown, and now black).  Then we spotted those little devils in China (where automobile sales sprouted almost 50% in June -- is that even possible?).  Now, Singapore's recession is apparently over, with a sudden 14% growth in GDP announced yesterday.

    It is odd.  I read one story in the morning on BBC about how Singapore's coastline is clogged with idle transport ships:

    IDLING SHIPS CLOG UP SINGAPORE SHORES
    By Pauline Mason
    Editor, Asia Business Report, BBC World

    It costs about $1,000 per day to keep a ship at the port.  From the top of Singapore's Equinox bar you can see the city skyline and ship after ship after ship.  Singapore claims to be the busiest port in the world, with some 130,000 ship arrivals each year.  But these days, the problem is many of those vessels are not putting back out to sea.
    The usual stay for a cargo carrier is just ten days. That is enough time to offload one set of cargo and take on another load, re-fuel and re-stock supplies.  But, of the 220 container ships arriving in Singapore this year, - excluding the tugs, yachts and bunkering vessels which are permanent port residents - more than half have stayed longer than that.  Another 44 cargo ships have been in port for more than six months.

    That same afternoon I read on Bloomberg:


    SINGAPORE PROBABLY EXITED RECESSION ON OUTPUT GAINS
    By Shamim Adam

    July 13 (Bloomberg) -- Singapore’s economy probably expanded for the first time in five quarters as a rebound in manufacturing helped the Southeast Asian nation emerge from its worst recession since independence in 1965.  Gross domestic product rose an annualized 13.4 percent last quarter from the previous three months, after shrinking 14.6 percent between January and March, according to the median estimate of 12 economists surveyed by Bloomberg News. The trade ministry will release the data at 8 a.m. tomorrow.
     

    Singpore staged this miraculous 14% growth in GDP WITHOUT an improvement in exports?  Either that, or the BBC story was old.  I looked for more information.  I found some on Yahoo:

    SINGAPORE'S ECONOMY EMERGES FROM RECESSION IN Q2
    Singapore says economy jumps 20 percent in second quarter, raises 2009 growth forecast
    By Alex Kennedy, Associated Press Writer

    SINGAPORE (NYSE:AP) -- Singapore's economy grew for the first time in a year, soaring 20 percent in the second quarter, a sign Asia is emerging from the global slump.  Gross domestic product jumped an annualized, seasonally adjusted 20.4 percent in the three months through June from the previous quarter, the Trade and Industry Ministry said Tuesday in a statement. It said GDP fell 3.7 percent from year earlier after a 9.6 percent drop in the first quarter.

    The ministry now expects the Southeast Asian city-state's economy to shrink between 4 percent and 6 percent this year, better than its previous forecast of a contraction between 6 percent and 9 percent.

    "The Singapore economy is back and back with a vengeance," said Robert Prior-Wandesforde, senior Asia economist for HSBC in Singapore. "We very much doubt that today's Singapore GDP release will be the last in Asia to provide a sizable upside surprise."

    The island's economy -- which relies on exports, finance and tourism -- had contracted the previous four quarters as it reeled from a collapse in global trade triggered by the financial crisis. An annualized 16.4 percent drop in the October-December period was the nadir of its deepest recession since splitting from Malaysia in 1965.

    Singapore is the first major Asia economy to report second quarter GDP results. The second quarter GDP estimate was calculated using data largely from April and May and is subject to revision.

    The ministry revised its first quarter economic figures to an annualized contraction of 12.7 percent from its initial estimate in April of a 19.7 percent contraction.

    A surge in pharmaceutical production helped boost growth in the second quarter. Manufacturing fell 1.5 percent from a year ago compared to a 24 percent contraction in the first quarter. Construction rose 18 percent in the second quarter while services dropped 5.1 percent.

    The ministry warned that the rebound in manufacturing could wane over the rest of the year.

    "A sizable part of Singapore's manufacturing uptick came from a spike in biomedical manufacturing output and electronics inventory restocking, both of which may not be sustained," the ministry said.

    Demand for exports from the U.S., Europe and Japan remains weak, but Singapore's sales to Indonesia, Malaysia and China have picked up, said Irvin Seah, an economist with DBS bank in Singapore.

    "The main driver for this recovery has been our exports to the region," Seah said. "We're seeing strong demand from Asia, especially China."

    A surge in pharmaceutical production helped boost growth in the second quarter. Manufacturing fell 1.5 percent from a year ago compared to a 24 percent contraction in the first quarter. Construction rose 18 percent in the second quarter while services dropped 5.1 percent.

    The ministry warned that the rebound in manufacturing could wane over the rest of the year.

    "A sizable part of Singapore's manufacturing uptick came from a spike in biomedical manufacturing output and electronics inventory restocking, both of which may not be sustained," the ministry said.

    Demand for exports from the U.S., Europe and Japan remains weak, but Singapore's sales to Indonesia, Malaysia and China have picked up, said Irvin Seah, an economist with DBS bank in Singapore.

    "The main driver for this recovery has been our exports to the region," Seah said. "We're seeing strong demand from Asia, especially China."

    "Asia is showing signs that it is able to drive its own demand, which is a good sign for the region's growth."

    The stories are getting confused.  Bloomberg credits 'a rebound in manufacturing' for the 14% GDP growth.  Yahoo admits that manufacturing fell, in fact, and will probably continue to fall over the rest of the year.  Yahoo credits the huge increase (20% annualized) to a 'a surge in pharmaceutical production' -- I can certainly see how a surge in pharmaceutical production cold levitate an entire economy -- and an electronics inventory re-stocking (unsold manufacturing items) -- and a nearly 20% increase in construction, spurred on by government stimulus infrastructure funding.  In other words, the ENTIRE growth was due to the stimulus construction spending.

    Exports, apparently, are not really up.  The ships clogging the Singapore shore are still idle.  Singapores sales to Asia are up; sales to America, Europe and Japan are down.

    How hard is it to raise GDP by 20%?  In the last quarter, with millions of unemployed, trillions of money lost in the housing debacle, bankruptcies rising, the loss of the American auto industry, commercial real estate freezing up and imploding, 20% vacancies in commercial buildings  and in rentals, American GDP shrank...6%.  Singapore's increase in construction and medical technology moved their economy up 3 times the rate that the global depression moved America's economy down?  It seems hard to believe.  Especially when exports remain flat, in an export-driven economy.  Why am I so suspicious?

    Did China's auto sales really jump 48%.  How could that be?  Did the government pay people to buy cars?  Apparently they did.  If the government did this with low-interest loans, then these loans are, in most cases, 'non-performing' loans unless the export economy picks up at the same time.  Still, when GM and Ford and Chrysler were failing, and when the global depression was raging, auto sales fell about 36%.  To rise 50%, we are talking about a full-fledged feeding frenzy, panic buying.

    In all honesty, 'green shoots' cannot be caused simply by government spending.  We learned this in the 1930's.  The government can spend billions on make-work projects over many years (the kind of proojects Singapore is apparently funding in construction projects) -- this adds to GDP numbers -- but if world trade refuses to budge, then the economy does not really grow.  The green shoots wither -- prove to be 'fake' green shoots, public relations green shoots.

    Now that China is reaching the end of its stockpiling of oil and commodities -- which gave a short-term lift lift to global shipping -- the Baltic Dry Index is ready to form a top again and start back down, proving that 'positive thinking' -- the rational explanation for the secret of expanding an economy -- does not work in a Night-Cycle contraction phase.  Only time works.  You can't build a tower when you an in the eye of a vortex.

    bdi

     

    TRADES TODAY?  We're still getting quite a few long trade buy signals.  We are largely ignoring them because of the momentum transformation we've been seeing.  We're looking for short trades.  We keep a daily log of issues in our database and their long-term trading position.  During a bull market (or bear rally), we see 85-90% of our database long.  And that has been the case for some time now.  However, the picture changed rather dramatically today, from 84% bullish to 79% bullish.  A 5% change in the indicator almost never happens.

    Bullish   
    79%    13-Jul
    84%    10-Jul
    84%    9-Jul
    83%    8-Jul
    83%    7-Jul
    84%    6-Jul
    85%    2-Jul
    85%    1-Jul
    85%    26-Jun
    85%    26-Jun
    85%    25-Jun
    84%    24-Jun
    87%    22-Jun
    87%    19-Jun
    87%    17-Jun
    89%    17-Jun
    89%    16-Jun
    90%    15-Jun
    89%    12-Jun

    We expect today's rally to continue for a few days, perhaps two days.  The chart below shows GSPC (S&P 500) as being in a downtrend now in terms of momentum, but being oversold short-term -- see the second pane below for the M2F alt indicator which moves fairly reliably between oversold and overbought levels.

    GSPC

    We are going long to Inverse ETF's that profit from a decline in a baket of stocks in a discrete industry.  We like SMN, which shorts Basic Materials; and SRS, which shorts real estate.  The charts of both are below.

    SMNSRS

    Other non-ETF's we are shorting: KBH Homes (NYSE:KBH), MGM, Freddie Mac, Fannie Mae, Citicorp, China Sun, Hovanians, and PNC Financial Services (NYSE:PNC).  We show some of these issues below.  We like one long trade: TEVA Pharmaceuticals.

    CHOVFRE

    KBH
    CSUN
     

    Tomorrow we'll look at Goldman-Sachs.


    NEW CGTS POSITIONS


    M5 3 Trading System.
    Short, C, Citicorp @ 2.78.  Short CSUN, China Sun, @ 3.7.  Short FNM, Fannie Mae, @ .58.  Short FRE, Freddie Mac, @ .61.  Short HOV, Hovnanian, @ 2.07.  Short MGM @ 5.85.  Short PNC, PNC Financial Services, @ 37.95.

    M5 10 Trading System.

    Long, TEVA, Teva Pharmaceuticals, @ 49.3.

    M2F Alt Trading System.
    Short KBH, KB Housing, @ 12.54.  Short MGM @ 5.85.

    Momentum Trading Ssytem.
    Long SMN, Short Basic Materials ETF, @ 20.48.  Short SRS, Short Real Estate ETF, 20.92.  Short FRE, Freddie Mac, @ .61.

    More information on this system can be found at

    home.mindspring.com/~mclark7/CGTS09.htm


    Portfolio of current ‘Seeking Alpha” trades at (updated weekly):

    home.mindspring.com/~mclark7/seekingalphaportfolio.htm


    Portfolio of CGTS Trades for 09 (updarted weekly) can be found at:
    home.mindspring.com/~mclark7/cgtsportfolio09.htm




    MJ Clark
    Clark's Gate Timing System
    Hanoi, Vietnam
    84 4 221 92210
     

    Disclosure: the author personally owns no securities mentioned in this newsletter.

    Stocks: C, CSUN, KBH, MGM, SMN, SRS, FMCC, FNMA, HOV, PNC
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