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Carlos X. Alexandre
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Carlos X. Alexandre is a Stock Trading Tactician (far more impressive than being a mere trader) and has managed investments privately — stocks, bonds, commodities and currencies — for over two decades. An investment industry outsider and politically independent, he developed proprietary trading... More
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CXA Markets
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  • CXA Markets Digest: Retail Cliff And Spain's Misery 0 comments
    Dec 29, 2012 3:43 PM | about stocks: SPY, DIA, QQQ, VTI, IWM, AGG, OIL, USO, GLD, SLV, UUP, FXE, FXY

    As we await the fiscal cliff resolution, temporary or otherwise, Tim Geithner reminded us that default is around the corner. However, everyone knows that the debt ceiling will go up, and it's only a negotiating tool, much like all the silliness that emanates out of Washington. Meanwhile retail sales were very weak, and the 0.7% growth as reported by MasterCard Advisors Spending Pulse fell very short of expectations and the lowest since 2008. While the common wisdom states that the "cliff" is to blame for lack of another "visible" reason, that is not a certainty, especially because credit card spending has been waning for months now. Meanwhile retailers resorted to discounts in an attempt to boost holiday sales, and we'll find out soon enough how revenue was impacted in the corporate world.

    The Bank of Japan showed a willingness to drive the yen lower, complying with the wishes of the politicians. The problem here is that everyone is seeking the same advantage, while the global economic background continues to deteriorate. Having an inflation target of 1% or 2% is pointless, for the BOJ has been on this quest for over two decades without success. Yet some BOJ members anticipate an economic recovery in 2013.

    Looking at the tiger that wasn't, "China posted a $51.7 billion deficit in its capital and financial account in the third quarter, official data showed on Wednesday, a downward revision to the preliminary $70.8 billion reported in October." In short, "there are signs that some investors are pulling short-term funds from the world's second-largest economy amid a global economic downturn, but Chinese officials have played down the risk of capital flight." Playing down risk has always been China's strength.

    In Spain, the pain continues unabated and "Bankia will wipe out the investments of 350,000 shareholders, many of them small savers and pensioners, after it emerged that losses on bad loans at the troubled bank were even worse than expected." So much for transparency. At the same time, and according to RR de Acuña & Asociados, home prices in the country are expected to drop another 30% over the next decade, "bringing the total decline from peak to trough towards 75%." To fully appreciate the condition, the following excerpt summarizes the industry, with an annual demand of 200,000 homes.

    "The market is broken," said Fernando Rodríguez de Acuña, the group's vice-president. "We calculate that there are almost 2m properties waiting to be sold. We have made no progress at all over the past five years in clearing the stock," he said. "There are 800,000 used homes on the market. Developers are sitting on a further 700,000 completed units. Another 300,000 have been foreclosed and 150,000 are in foreclosure proceedings, and there are another 250,000 still under construction. It's crazy."

    Expecting an European resolution to come anytime soon is to underestimate the damage done.

    Market TrendsAvoiding the market during the fiscal cliff nonsense was the best strategy, because with so many rumors flying around, one can be eaten alive in 24 hours or less. With exception of the Russell 2000, which is still short and long-term positive, indices are either neutral or negative. The dollar has been building a base with a short-term neutral trend, while staying long-term negative. The euro holds both short and long-term trends in the positive column, while the yen continues its descent. Both WTI and Brent oil held their short-term positive trends, while keeping their long-term neutral trends intact. Gold, silver and copper kept their short and long term negative trends intact, providing plenty of fuel for speculative talk. The 10-year Treasury rate declined to 1.71% from 1.75%. The 10-year note and 30-year bond are still long-term neutral and negative respectively, and the short-term trend is now positive for the 10-year, and neutral for the 30-year. Next week the books for 2012 will be closed, and we'll get global PMI numbers as well as the always fascinating U.S. unemployment report.

    CXA Markets Nimble
    Average Daily Risk Exposure: 31.3% of Capital
    S&P 500 ETF (SPY) - including dividends13.24%1.04%

    (click to enlarge)

    U.S.A.The S&P/Case-Shiller 20-city composite declined 0.1% in October after a 0.2% gain in September. However, home prices were up 4.3% for the year, about the same that occurred in May of 2010. New home sales rose 4.4% to an annual rate of 377,000, after an October downwardly revised 361,000 rate from 368,000. The NAR's Pending Home Sales Index increased 1.7% to 106.4 in November from a downwardly revised 104.6 in October.

    The Mortgage Bankers Association's mortgage application activity index decreased 18.6%. Refinancing was down 24.6% and home purchases decreased 2.5%. Freddie Mac's average 30-year mortgage decreased to 3.35% from 3.37%, and the 15-year was unchanged at 2.65%.

    The Richmond Fed manufacturing index declined to 5 from 9. Shipments dropped from 11 to 6, new orders was unchanged at 10, and the jobs turned negative, dropping 6 points to -3. Jobless claims declined 12,000 to 350,000, with the 4-week moving average registering 356,750, a decrease of 11,250. The advance number for seasonally adjusted insured unemployment was 3,206,000, a decrease of 32,000, and the 4-week moving average declined by 24,750 to 3,219,000.

    The Conference Board Consumer Confidence Index, declined to 65.1 in December from 71.5 in November. The Expectations Index dropped sharply to 66.5 from 80.9, and the Present Situation Index increased to 62.8 from 57.4 last month.

    GlobalEurozone PMI dropped from 45.8 in November to 44.5 in December, showing a sharp fall in retail sales. In November, French households expenditure on goods increased by 0.2%, after a decline of 0.2% in October. This increase is mainly attributable to a rise in expenditures on energy products.

    Japan manufacturing PMI dropped to 45 from 46.5, while retail sales increased 1.3% after a 1.2% decline the previous month. Preliminary industrial production dropped 1.7% and the unemployment rate declined to 4.1% from 4.2%. CPI dropped 0.1% from one year ago.

    Themes: Market Outlook Stocks: SPY, DIA, QQQ, VTI, IWM, AGG, OIL, USO, GLD, SLV, UUP, FXE, FXY
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