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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
My company:
CXA Markets
My blog:
CXA Markets BroadView
My book:
The Strategic Truth about Investing
  • CXA Markets Digest: Everything Is Being Extended 0 comments
    Mar 10, 2013 9:32 AM | about stocks: SPY, DIA, QQQ, VTI, IWM, AGG, OIL, USO, GLD, SLV, UUP, FXE, FXY

    It appears that these days everything is being extended, and much like a rubber band, one can only extend it so far until it breaks. The Fed keeps on telling us that they just need more time, as far as QE is concerned, and the Europeans are warming up to the idea of extending the time required by Portugal and Ireland to pay some of their debts. Though that Ireland was fine! Then ECB chief Mario Draghi reverted to the custom of extending the time frame for recovery into the future, although there's always a soothing, yet creepy undertone.

    "Later in 2013, economic activity should gradually recover, supported by a strengthening global backdrop our accommodative monetary policy stance. Necessary balance sheet adjustments in the public and private sectors will continue to weigh on economic activity."

    As a side note, Fitch downgraded Italy, which didn't have much of an impact on markets. The Fed faulted "government fiscal and health-care policies" for holding back the economy, as indicated by the famous Beige Book, although there are other factors in play that escape them. One other issue is the practice of extending car loan periods, which indicates how stressed the consumer truly is, with the word "subprime" finding its way back into our economic lives.

    Auto lenders gave borrowers a record 65 months, on average, to repay new-car loans in the fourth quarter, credit-tracking company Experian said on Tuesday. The average term for new-car loans was up from 63 months a year earlier. For loans on used cars, the average term was unchanged at 60 months. The new-car loan term record came as lenders continued to finance more subprime borrowers. Subprime borrowers took 43.2 percent of all car loans, the most in any fourth quarter since 2007 and nearly seven percentage points more than in 2009, according to Experian.

    Richard Fisher summarized the global economy quite well.

    "It is not possible to create jobs through monetary policy alone," Dallas Fed President Richard Fisher said at a World Affairs Council of San Antonio event. "The U.S. remains the economic engine of the world ... it's not China, it's not Europe, it's the U.S., and the U.S. remains in neutral."

    Yes, as much as some people hate the fact, the U.S. is still it, regardless of the hoopla dispensed about emerging markets and all that jazz. It's "Reality 101!" Lastly, China is feeling the pinch, and central bank deputy governor Yi Gang stated that "China is fully prepared for a looming currency war." Stay tuned!

    Market TrendsNew Dow records continue to litter the market landscape, and only the Russell 2000 has done so. S&P is close but Nasdaq is miles away. At this juncture, all indices are positive short and long-term. The dollar continues to advance, and is now up almost 4% for the year, with short and long-term trends in the positive column. The euro has found the $1.30 level to be supportive for now, and will easily bounce to $1.32 unless something unusual hits the news. Let's see if there's a reversal for the correlation between the dollar and equities. The yen is still on a free fall, keeping both negative trends intact, and is now 9.5% lower against the dollar since January, after a decline of 11% in 2012. WTI and Brent oil are holding around the $90 and $110 levels respectively, with short-term negative trends. Long-term, WTI is negative and Brent is neutral. Trends for gold and silver are still negative all around, although a rebound is developing, with $1,570 and $28.50 tough to crack. Copper is on the same boat, around $3.50. The 10-year Treasury rate reversed course and rose to 2.05% from 1.85%. The 10-year note and the 30-year held their short-term positive trends, with both long-term trends turning negative. Next week we'll get U.S. retail sales, inflation data, and consumer sentiment, more global PMIs, and yet another EU economic summit.

    InvestmentsYTD20122011
    CXA Markets Nimble
    Average Daily Risk Exposure: 38.1% of Capital
    12.81%43.84%77.75%
    S&P 500 ETF (SPY) - including reinvested dividends9.14%16.01%1.04%

    (click to enlarge)

    U.S.A.Services PMI increased to 56 from 55.2 in January, with the new orders index up 3.8 points to 58.2, and production rising 0.5 points to 56.9%. Employment decreased slightly by 0.3 points to 57.2. The IBD/TIPP Economic Optimism Index dropped by 5.1 points to 42.2, and this index is a good leading indicator for the other sentiment indices.

    The Mortgage Bankers Association's mortgage application activity index increased by 14.8%, the first rise in four weeks. Refinancing increased 15.0% and home purchases increased 18.0%. Freddie Mac's average 30-year mortgage rose to 3.52% from 3.51%, and the 15-year was unchanged at 2.76%. Jobless claims decreased 7,000 to 340,000, and the 4-week moving average decreased 7,000 to 348,750. The number for seasonally adjusted insured unemployment increased 3,000 to 3,094,000.

    Factory orders declined 2.0% in January, largely due to fewer orders for aircraft. Excluding transportation, orders were up 1.3%. Orders for durable goods dropped 4.9% in January, and nondurable goods rose only by 0.6%. In addition, December factory orders were revised down to a 1.3% increase from the initial 1.8% gain. Trade balance deficit grew by $6.3 billion in January to $44.4 billion. Exports dropped 1.2%, and imports rose 1.8%. Revised productivity for Q4 2012 declined at a 1.9% annual rate, after a 3.1% third-quarter increase. Labor costs increased at a 4.6%. Lower productivity and higher labor costs doesn't translate into a healthy economy.

    Consumer credit continues to rise, still driven by student and auto loans. Debt increased $16.2 billion, with non-revolving credit up $16 billion, while credit cards rose a meager $106 million. That's the story that will not end well. Wholesale inventories increased 1.2%, and have risen 6.5% over the last 12 months. The inventory-sales ratio rose to 1.21 in January from 1.19 in December. Sales declined 0.8%, and it's yet another story that will unfold. The always impressive and highly political unemployment rate dropped to 7.7% from 7.9%, while the participation rate declined to a new low of 63.5. The 236,000 new jobs do not account for the 300,000 people that left the workforce. Enough said.

    GlobalThe eurozone's PPI increased 0.6%, and is running at a 1.9% annual rate. Final services PMI declined to 47.9 from 48.6, and one must note that Spain registered 44.7 and Italy came in at 43.6, providing plenty of economic pressure. Eurozone retail sales increased 1.2% on a monthly basis, but was down 1.3% on an annual basis. German factory orders dropped 1.9% In January, with December revised to a 1.1% gain. German industrial output was unchanged in January.

    China's services PMI decreased to 54.5 in February from 56.2 in January. China's trade balance showed a surplus of $15 billion, with exports rising 21.8% year-over-year. Imports dropped 15.2%, leaving some scratching their heads. China's retail sales were up 12.3% from one year ago, and the weakest showing in 9 years. Industrial production was up 9.9%, fixed-asset investment increased 21.2%, and February inflation picked up and registered 3.2% percent. PPI declined -1.6%. Japan's GDP was revised to a gain of 0.1% from a contraction of 0.1%, delivering annual growth of 0.2%, and hardly a reason to celebrate.

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