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CautiousInvestor

CautiousInvestor
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  • Wall Street Breakfast: Argentina Held In Contempt By NY Judge [View article]
    I know what you are saying but they are doing everything posssible to make it worse. Failure to implement promised reforms and rigid immigration policies are causing acute economic pain. They have lousy demographics but their policies amplify their unfavorable circumstances.
    Sep 30 09:55 AM | 2 Likes Like |Link to Comment
  • Wall Street Breakfast: Argentina Held In Contempt By NY Judge [View article]
    Until recently, the last hike in Japan's VAT was in 1997 and it increase to 5% from 3% and almost immediately afterwards, Japan plunged into a deep recession with a lasting impact: the country has struggled to escape the trap of deflation, or decreasing prices, almost yearly every since.

    More recently, Japan increased its VAT from 5% to 8% with highly predictable outcomes based upon based past experience. Industrial production collapsed in July falling 1.5% while leaving the ratio of inventories to shipments at its highest level since August 2012. That was before Mr Abe arrived on the scene with a promise of unlimited stimulus to banish deflation.

    As the article notes personal consumption expenditures cratered, falling 4.7% while marking the fifth consecutive monthly decline. Behind this contraction in spending is the decline in real incomes as seen in wages falling 2.6%, marking a 14th consecutive monthly decline.

    Against this alarming backdrop, Japanese leaders are planning with the second increase in the VAT from 8% to 10% but may introduce a package of fiscal stimulus to offset the negative impact of a hikes in the VAT.

    The VAT is being increased to improve structural budget issues but if you increase spending to offset the contracting effects of the VAT increase it would appear you are treading water which is exactly what Japan has been doing for decades.
    Sep 30 08:54 AM | 2 Likes Like |Link to Comment
  • The Big Kahuna Korrection, Or Buy Yom Kippur? [View article]
    A very thoughful and comprehensive analysis Cam. The low percentage of S&P constituents trading avove their 20 DMA (about 20%) and the extreme of the 10-day average of the SPX cumulative advance-decline line lend support to the view that in the short term the market is oversold. But the percentage of stocks above their 50 DMA, VIX, VIX term structure and your favorite indicator all suggest there is more room to the downside. Thanks for article and the details of your favoite indicator.
    Sep 28 03:19 PM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Investor Lessons From This Week's Data Deluge [View article]
    Thanks Jeff for another thoughtful and insight-packed issue of WTWA.

    From my perch, the really big things to be nervous about include the rising dollar, falling commodity prices, China's re balancing, sclerotic growth throughout Europe, geo political instability and falling interest rates. According to the IMF, world CPI down-ticked to 3.2% during July while the inflation rate for advanced economies was just 1.6% y/y. That’s the 27th consecutive month of readings under 2%.

    Some of these larger picture developments are spilling into US markets where we have seen large and mega cap stocks hit new highs while small cap stocks, energy stocks, developed & emerging international stocks and most commodity sector have shown weakness. Divergences are broadening and the larger threats to US markets are largely exogenous.

    In the near term, the divergences with small stocks may be the most threatening although this could be easily debated. Anyway, our friends at 361 Capital offered this one of their recent notes: We noted in March that the world was going to get more difficult for small caps. Historically high valuations combined with spikes in volatility are never a good sign. Since March, Small Caps have only continued to under perform as the summer doldrums grabbed hold. If Small Caps are to reverse their under performance, it should happen in the Q4 as year-end seasonal trends tend to strongly benefit risk and smaller cap equities. If not, then this key thermometer of risk could be sending investors a bigger signal.

    Offsetting this possible dire warning is the fact that the S&P 500 has not declined in the twelve months following a mid-term election since 1946.
    Sep 28 08:53 AM | 5 Likes Like |Link to Comment
  • Wall Street Breakfast: Global Markets Digest Slide In U.S. [View article]
    Japan is a simply a mess with subdued retail spending, falling real incomes and persistent disinflation. This sorry state will increase calls for the central bank to purchase more JGB's, the same policy that has failed to produce any constructive results since its inception.
    Sep 26 08:04 AM | 5 Likes Like |Link to Comment
  • Wall Street Breakfast: Siemens To Acquire Dresser-Rand For $7.6B [View article]
    At the G20 meeting the EU was under pressure to do more to stimulate growth with growing expectations of Draghi but his options are becoming increasingly limited. And his most recent effort to expand lending through targeted long term funding has been somewhat of a failure inasmuch as banks have signed up for only 83 billion euro when hopes were for 1 trillion euro. Many political leaders are failing in tackling needed structural reforms in product/labor markets and live under the chimera that QE is needed when rates are already low and spreads between Germany and the peripherals have tightened.
    Sep 22 07:47 AM | 2 Likes Like |Link to Comment
  • Weighing The Week Ahead: Should Stock Investors Fear Current 'Divergences'? [View article]
    From Dana Lyons:

    The first step was to run the test to independently verify the 47% figure. We did so and found around 45% of Nasdaq stocks were down 20% from their 52-week high — close enough. Suffice it to say that sounds like an alarmingly high number.

    That leads us to the second step: determining context. 47% sounds high but is it really? Well, we ran the test since the beginning of the year and as it turns out, the percentage has been above 40% for most of the time since March. So it may be high, but it isn’t an extremely recent development. If it is one of those divergences that we’ve observed so often lately, it is apparently another one that can persist for some time before causing real damage to the major averages.
    Sep 21 09:27 AM | 7 Likes Like |Link to Comment
  • Weighing The Week Ahead: Should Stock Investors Fear Current 'Divergences'? [View article]
    Jeff, I have been traveling and I think you missed an installment or two but it's great to be able to sit down on Sunday morning and read one of my favorite blogs. You were spot on about last week and I lean to the view there is increasing tension between the committee’s standing statement of keeping rates low for a considerable period versus the rate forecasts. And I believe the language of considerable time has been emasculated. With this, I think the markets are reading the Fed's statement differently and we are seeing markets move in different directions. In addition to macro global, I have been spending more time with technical's and will say the bearishness you note inside the NDX should raise eyebrows but it has been with is for awhile and is doing nothing to halt the advance of the S&P. Similarly divergences between RUT and SPX should be bearish but have not been over the past two years based upon examination of the data. And Urban Carmel of the Fat Pitch notes that a surge in RUT is a greater threat inasmuch as it constitutes beta chasing and is supported by the data. I am not dismissing deteriorating internals and different divergences only saying they are not new and thus far have not induced harm. Lastly, I'm inclined to be believe we will see some volatility in the coming days based upon options measures. Thanks again.
    Sep 21 09:05 AM | 5 Likes Like |Link to Comment
  • Wall Street Breakfast: Amazon Introduces New Kindle Lineup [View article]
    The only functioning groups which might serve as part of a surrogate ground army are the Peshmerga Kurds and certain Sunni's in Anbar province. The Sunni's are suspicious of us, though, because promises were not kept and we had a hand in installing Malaki (a friend of Iran)to head the new government but he quickly revealed his sympathies for the Muslim Brootherhood and was removed by the army. Even with this, Iraq holds some promise. Syria is different. In addition to the Free Syrian Army, there hundreds of splinter groups who are more interested in removing Assad than fighting ISIS but even with a year of training the 5K graduates who join the FSA will no match for ISIS and will retain their core interest in fighting Assad. And within a year, ISIS could easily expand to 50K with the majority in Syria making our Syria strategy totally unworkable. Sadly, everyone knows this except our president.
    Sep 18 07:32 AM | 6 Likes Like |Link to Comment
  • Wall Street Breakfast: Sony Warns Of $2.2B Net Loss [View article]
    Having read a fair amount about Fed interest rate increases and stock prices, I am lost that market players are almost paralyzed awaiting for priestess Yellen's latest cryptic prophecy about the direction of federal Funds rates. Why? "There is no consistent historical relationship between interest rates and the stock market, says Javier Estrada, a professor of finance at the IESE Business School in Barcelona." In contrast, Goldman's shallow study of rate hikes and markets in 1994, 1999 and 2004 shows the market tended to increase in the 3, 6 and 12 months prior to the rate hikes and increased in all intervals, except the 3 month period, following the rate hikes. In a broader study, David Rosenberg found that stocks tend to increase in the first 1/4 of the rate hike cycle. Dennis Quellet, using the Rosenberg data, concludes rate hike cycles are generally not damaging providing inflation is not rising at the time. And other studies suggest if the 10 year is yielding below 5% stocks will not be fazed by rate hikes. In the current environment rate hikes should not pose a threat but our environment is so unique that history may be of little value.
    Sep 17 08:03 AM | 2 Likes Like |Link to Comment
  • Wall Street Breakfast: Microsoft Announces Windows 9 Event Following Mojang Acquisition [View article]
    I think there are so many variables that uncertainty is being created which in itself will weigh upon a currency. Should "yes" prevail, there is concern over division of oil revenues and Scottish willingness to take responsibility for their share of national debt. And this overlooks increasing US rates and falling oil prices.
    Sep 16 08:46 AM | 6 Likes Like |Link to Comment
  • Wall Street Breakfast: RBS, Lloyds To Leave For England If Scots Vote For Independence [View article]
    Lots of great comments on our president. Anyway, when he tried to convince us that ISIS could not be a religious group he relied upon the specious argument that it could not be because it commits atrocities. His knowledge of history must be very dim because in one campaign of the Crusades a task was to rid the world of as many non-Christians as possible - both Muslims and Jews. "The Crusaders gave the Jews two choices in their slogan: "Christ-killers, embrace the Cross or die!" 12,000 Jews in the Rhine Valley alone were killed as the first Crusade passed through. Some Jewish writers refer to these events as the "first holocaust." Once the army reached Jerusalem and broke through the city walls, they slaughtered all the inhabitants that they could find (men, women, children, newborns). After locating about 6,000 Jews holed up in the synagogue, they set the building on fire; the Jews were burned alive. The Crusaders found that about 30,000 Muslims had fled to the al Aqsa Mosque. The Muslim were also slaughtered without mercy." ISIS is and remains a muslim organization.
    Sep 11 10:42 AM | 3 Likes Like |Link to Comment
  • Wall Street Breakfast: RBS, Lloyds To Leave For England If Scots Vote For Independence [View article]
    Wyo, I found his need to explain to the public that ISIS is not a muslim group very, very interesting. Of course its a muslim group and many of its actions are taken to address theological differences but the fact that Obama asserts otherwise is very revealing.
    Sep 11 08:45 AM | 13 Likes Like |Link to Comment
  • Wall Street Breakfast: RBS, Lloyds To Leave For England If Scots Vote For Independence [View article]
    After much dithering, I am glad our reluctant president has formulated a strategy to counter the ISIS threat. Out of necessity the strategy will be heavily dependent on partners in the region, many of whom are at odds with one another and have been incapable of achieving progress without the US to date. The coalition is fraught with tensions and divergent interests which will only increase the challenge of managing a fragile team.
    Sep 11 08:21 AM | 5 Likes Like |Link to Comment
  • Wall Street Breakfast: Dollar General To Go Hostile With $9.1B Bid [View article]
    gggl, I agree with your statement on disinflation lowering interest rates and thereby helping efforts to reduce the deficit as a percent of GDP. Unless I am missing something, I can only see inflation helping "improve" the deficit by pushing more people into higher tax brackets. Whatever the case, disinflation is a lame excuse for missing deficit reduction targets when there are so many other possible reasons including insane macro policies and fierce political opposition to spending cuts from the ruling Socialist party.
    Sep 10 08:50 AM | 5 Likes Like |Link to Comment
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