New York Post – Google, the highest-priced stock in the S&P 500 Index, closed above $900 a share yesterday for the first time.
The company is in the midst of an impressive rally, and yesterday Morgan Stanley analysts were among the bulls, upping the target price to $996, from $932.
Also yesterday, investors anticipated another slate of new products and services at Google’s I/O developers conference in San Francisco this week. More
Townhall Finance – Going into this week, we’re not much closer to knowing for sure if the stock market’s climb from its last notable trough on 18 April 2013 is the result of noise, a fundamental shift in investor focus, or the Fed’s recent indication that it might really amp up its current quantitative easing program as we have previously speculated it might.
But regardless, even if stock prices stay flat, this will be a big week for the S&P 500, because this is the week that three of the largest companies that compose the market-cap weighted index will be determining who owns their stock for the purpose of paying out dividends for 2013-Q2!
In fact, two of those three companies will be noting their shareholders of record today (Monday, 13 May 2013): Exxon Mobil (NYSE: XOM) and Apple (Nasdaq: AAPL). They just coincidentally happen to be the two biggest companies in the S&P 500, accounting for nearly 5.74% of the entire value of the index (at least, as of last Friday, 10 May 2013)!
The third S&P 500 heavy hitter who will be noting their shareholders of record on Friday this week is Chevron (NYSE: CVX), which is only the fifth largest component stock of the index, representing about 1.6% of the S&P 500′s value. More
Zero Hedge – The break of the JPY100 has unleashed the animal spirits. The US dollar is broadly higher and equity markets are finishing the week on a strong note. Bond yields are mostly higher, led by a sharp 9 bp rise in 10-year JGB yields. Indeed, at almost 69 bp, the benchmark 10-year yield is the highest since late February.
There are two fundamental themes. The first is that despite signs of slower US growth here in Q2, the US labor market continues to improve. Weekly initial jobless claims and the smoothed 4-week moving average fell to new cyclical lows. There are several influences on the Us stock market, we find that the weekly jobless claims is among the most important high frequency economic reports that tracks the US S&P 500 very closely. This encouraged more talk that the Fed may taper off its purchases of long-term assets sooner than the market currently anticipates, which is late this year.
The second is the news reported in Tokyo, after the JPY100 level broke in North American yesterday, that Japanese investors turned buyers of foreign bonds. This is an important signal for the yen bears. They have been selling yen partly in expectation that that is what Japanese investors will do as they are displaced from the local bond market by the BOJ’s qualitative and quantitative easing. However, this has not materialized until now.
While the market indices have been hitting new highs, a good deal of commentary remains skeptical and bearish. So what bugs us about this market?
If one word could be used, perhaps the best would be “artificial”. The rise in security prices is not a manifestation of a confident citizenry and a booming economy, but looks artificial and contrived. The artifice has been engineered by an ever-intrusive government and its decision to control economic behavior.
Of course, the elephant in the living room is the Federal Reserve. Its super-accomodative monetary policy and manipulation of rates have produced a near-zero interest rate environment. Does anyone really believe that our debt-laden federal government could borrow at rock-bottom levels in a true market economy characterized by arm’s length transactions?
The liquidity and bargain basement rates have benefited the big banks and other major players in the financial sector. In effect, savers, who are being paid almost no interest, are transferring wealth to recapitalize institutions still reeling from their awful credit decisions of the last decade. And this transfer has taken place outside the tax system and without any real accountability to the people or their elected representatives.
Low interest rates also push securities prices higher, as valuation models rely on discounted cash flow analysis. As benchmark rates decline, the present value of future cash flows increases through the operation of simple mathematics, pumping up the results. In a contrived low rate environment, one suspects the rise in prices is-well, again, artificial.
One also hears a lot about “breadth” these days. The current bull is being driven by a relatively small number of players, mainly institutional investors and hedge funds with access to huge pools of liquidity. Retail investors are tending to sit this one out. Indeed, a large number of them are baby boomers at or approaching retirement age, where the overriding concern becomes preservation of capital.
Devotees of big government, the Fed and Barack Obama are cooing about the robust performance of the major indices. The DJIA, which last approached the 14,000 threshold in October 2007, has pushed through that level. So if one bought into the market at its depressed bottom levels in 2009, one has made a great pile of money. But if you look at the steady state picture, one sees markets that have been treading water, and with a huge amount of dangerous volatility. After all, if you had a nice nest egg in October 2007, you would be relieved at the recovery of your portfolio by spring of 2013. But you would have EARNED just about nothing during the intervening five and a half years.
It all looks a bit fishy. The current market has a lot of risk. The big question: when rates start rising again, as they inevitably must, will the broader economy still be caught in a web of strangling regulations and out-of-control government spending, or will a healthier set of variables prevail?
If the former, all bets are off.
Submitted by Pater Tenebrarum of Acting-Man blog via Zero Hedge
Imagine the following: you read in a newspaper that a group of investors has sold US dollars to the tune of $820 million over the past two months for other currencies. This incidentally represents approximately 0.082% of the broad dollar money supply TMS-2 (which amounts to roughly $9.3 trillion at present). It means they would have been selling roughly $20 million per trading day. You then learn that $4 trillion of US dollars are traded in global currency markets every single trading day. Would you believe that their selling has influenced the exchange value of the dollar beyond a rounding error?
And yet, we are supposed to believe that the selling of an equivalent amount of gold from the gold holdings of exchange traded funds over the past two months (they have sold 140 tons, or 0.082% of the total global gold supply) has greatly influenced the gold price.
According to a recent press report:
“Exchange traded funds have transformed the gold market. Since the first fund was launched nearly a decade ago, the products have become so successful in offering a simple way for investors to buy physical gold that they have acquired the nickname “the people’s central bank.”
But what happens when the people’s central bank decides to sell?
That is the question now haunting the bullion market. Since the start of January, gold ETFs have dumped 140 tonnes of gold. February saw the largest monthly outflow of gold from ETFs on record.
Zero Hedge – “Mission Accomplished” - With CNBC now lost for countdown-able targets (though 20,000 is so close), we leave it to none other than Jim Cramer to sum up where we stand (oh and the following list of remarkable then-and-now macro, micro, and market variables): “we all know it’s going to end badly, but in the meantime we can make some money” – ZH translation: “just make sure to sell ahead of everyone else.”
- Dow Jones Industrial Average: Then 14164.5; Now 14164.5
- Regular Gas Price: Then $2.75; Now $3.73
- GDP Growth: Then +2.5%; Now +1.6%
- Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
- Americans On Food Stamps: Then 26.9 million; Now 47.69 million
Zero Hedge -
Update: Eurozone unemployment rate rises to a record 11.9%, expected was 11.8%, while UK manufacturing PMI plunges from 50.5 to 47.9, on expectations of an increase to 51.0.
If the new year started off with a bang, March is setting up to be quite a whimper. In the first news overnight, we got the “other” official Chinese PMI, which as we had predicted (recall from our first China PMI analysis that “it is quite likely that the official February print will be just as weak if not more”) dropped: while the HSBC PMI dropped to 50.4, the official number declined even more to just barely expansionary or 50.1, below expectations of a 50.5 print, and the lowest print in five months. This was to be expected: Chinese real-estate inflation is still as persistent as ever, and the government is telegraphing to the world’s central banks to back off on the hot money. One country, however, that did not have much hot money issues was Japan, where CPI declined -0.3% in January compared to -0.1% in December, while headline Tokyo February data showed an even bigger -0.9% drop down from a revised -0.5% in January. Considering the ongoing surge in energy prices and the imminent surge on wheat-related food prices, this data is highly suspect. Then out of Europe, we got another bunch of PMIs and while French and Germany posted tiny beats (43.9 vs Exp. 43.6, and 50.3 vs 50.1), with Germany retail sales also beating solidly to cement the impression that Germany is doing ok once more, it was Italy’s turn to disappoint, with its PMI missing expectations of a 47.5 print, instead sliding from 47.8 to 45.8. But even worse was the Italian January unemployment rate which rose from 11.3% to 11.7%, the highest on record, while youth unemployment soared from 37.1% to 38.7%: also the highest on record, and proof that in Europe nothing at all is fixed, which will be further confirmed once today’s LTRO repayment shows that banks have no desire to part with the ECB’s cash contrary to optimistic expectations.
WSJ – The Super Bowl was played on Feb. 3, with the Baltimore Ravens coming out on top. The loser claimed, with some justification, that the officials stole the game. The loser I refer to is Wal-Mart, WMT +0.94% not the unlucky San Francisco 49ers.
February was a rotten month for the Bentonville Giants. Rarely does one hear musings such as “Where are all the customers?” and “Where is their money?”—let alone grumblings such as “total disaster” and “the worst in seven years”—from senior executives in a publicly traded company. Such wording is frowned upon in Investor Relations 101. But that is how Cameron Geiger, Wal-Mart’s vice president for merchandise replenishment, described woeful February sales in a leaked email.
Wal-Mart CEO Bill Simon quickly stepped in bearing higher shareholder dividends and an explanation. It was the officials’ fault, he said. Mr. Simon didn’t mean the pinstriped guys who rule the gridiron, but the U.S. Congress and the Internal Revenue Service. The Washington zebras made two misjudged calls that wrecked Wal-Mart’s hopes for February.
(Reuters) – The euro and the dollar rose against the yen on Monday after the G20 decided not to criticize Japan for its expansionist policies, but shares eased as Europe’s weak growth outlook weighed on sentiment.
Financial leaders from the world’s 20 biggest economies promised on Saturday not to devalue their currencies to boost exports, aiming to defuse talk of currency wars that had been roiling the markets.
The euro gained 0.2 percent to 125.32 yen, edging up toward a 34-month high of 127.71 yen hit earlier this month, while the dollar rose 0.6 percent to 94 yen, closer to its highest level since May 2010 of 94.46 hit on February 11.
“Future yen direction will continue to be driven by domestic monetary policy from the Bank of Japan and improving international investor confidence, which are both driving the yen weaker,” said Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ.
Eagle Daily Investor – While last week’s ETF Talk explained how to capitalize on the housing rebound by investing in industrials, today’s article focuses more directly on how to profit from the recovery in housing. One exchange-traded fund (ETF) that is designed to take advantage of the recovery in housing is SPDR S&P Homebuilders (XHB). That fund is worth considering strongly due to an improving labor market and continuing low mortgage rates that are spurring home buying.
This non-diversified fund seeks investment results, before fees and expenses, which correspond to the total return performance of the homebuilding segment of a U.S. total market composite index.
After an astounding 52.52% increase in 2012, XHB has risen 4.49% so far this year. XHB also yields 0.97%, so it offers a bit of income along with the capital appreciation of its share price. In light of the Fed’s easy-money policies, further gains seem likely for housing and housing-related funds.