“The stock markets closed on Friday at their all-time highs.
However, one of the biggest headscratchers has been the nature of the stock market rally.
Specifically, the more conservative sectors like health care have been outperforming the more volatile cyclical sectors.
If people feel good about the economy, they should hunger for risk and invest in more economically sensitive names.
However, investors have been doing the exact opposite month after month this year.
Morgan Stanley’s Adam Parker talks about this in a new note titled “The Definition Of Insanity”:
Doing something over and over again and expecting a different outcome? Once again, high-beta stocks, cyclicals and smaller stocks underperformed in a strong market during April. In a break from the prior three months, junk narrowly beat quality while value beat growth.
One explanation for this discrepancy could be…”
Monthly Archives: May 2013
Senate Scheduled to Vote on Internet Sales Tax
“Attention online shoppers: The days of tax-free shopping on the Internet may soon end for many of you.
The Senate is scheduled to vote Monday on a bill that would empower states to collect sales taxes for purchases made over the Internet. The measure is expected to pass because it has already survived three procedural votes. But it faces opposition in the House, where some Republicans regard it as a tax increase. A broad coalition of retailers is lobbying in favor of it.
Under current law, states can only require retailers to collect sales taxes if the store has a physical presence in the state.
(Read More: Are You a Tax Cheat If You Shop Online Tax-Free?)
That means big retailers with stores all over the country like Walmart, Best Buy and Target collect sales taxes when they sell goods over the Internet. But online retailers like eBay and Amazon don’t have to collect sales taxes, except in states where they have offices or distribution centers.
As a result, many online sales are tax-free, giving Internet retailers an advantage over brick-and-mortar stores.
The bill would empower states to require businesses to collect taxes for products they sell on the Internet, in catalogs and through radio and TV ads. Under the legislation, the sales taxes would be sent to the states where a shopper lives.
The measure pits brick-and-mortar stores against online services….”
Neiman Marcus May Go Public as Investors Look to Get Liquid
“Private-equity firms TPG Capital and Warburg Pincus are exploring a sale or a public offering of Neiman Marcus Group, according to a Bloomberg News report late on Sunday.
The private-equity firms, which bought the Dallas-based retailer in 2005 for $5.1 billion, have interviewed banks and are about to hire Credit Suisse Group to run the dual track process, according to the report, which cited two people familiar with the situation.
A Credit Suisse spokesman declined to comment…..”
Comments »$PFE to Sell the Little Blue Pill Online
“TRENTON, N.J. (AP) — Men who are bashful about needing help in the bedroom no longer have to go to the drugstore to buy that little blue pill.
In a first for the drug industry, Pfizer Inc. told The Associated Press that the drugmaker will begin selling its popular erectile dysfunction pill Viagra directly to patients on its website.
Men still will need a prescription to buy the blue, diamond-shaped pill on viagra.com, but they no longer have to face a pharmacist to get it filled. And for those who are bothered by Viagra’s steep $25-a-pill price, Pfizer is offering three free pills with the first order and 30 percent off the second one.
Pfizer’s bold move blows up the drug industry’s distribution model. Drugmakers don’t sell medicines directly to patients. Instead, they sell in bulk to wholesalers, who then distribute the drugs to pharmacies, hospitals and doctors’ offices.
But the world’s second-largest drugmaker is trying a new strategy to tackle a problem that plagues the industry. Unscrupulous online pharmacies increasingly offer patients counterfeit versions of Viagra and other brand-name drugs for up to 95 percent off with no prescription needed. Patients don’t realize the drugs are fake or that legitimate pharmacies require a prescription.
Other major drugmakers likely will watch Pfizer’s move closely. If it works, drugmakers could begin selling other medicines that are rampantly counterfeited and sold online, particularly treatments for non-urgent conditions seen as embarrassing. Think: diet drugs, medicines for baldness and birth control pills.
“If it works, everybody will hop on the train,” says Les Funtleyder, a health care strategist at private equity fund Poliwogg who believes Pfizer’s site will attract “fence-sitters” who are nervous about buying online.
The online Viagra sales are Pfizer’s latest effort to combat a problem that has grown with the popularity of the Internet….”
Comments »$TSN Reports a 43% Drop in Profits as Consumers Trade Down, Sales Up 2%
“May 6 (Reuters) – Tyson Foods Inc, the largest U.S. meat processor, reported a 43 percent fall in quarterly profit as shoppers and restaurants switched to cheaper chicken from beef to save money.
“Our beef segment suffered margin compression as consumers opted for the relative value of chicken,” Chief Executive Donnie Smith said in a statement on Monday….”
Comments »Old Man Buffett Says U.S. Economy is Improving Slowly
“(Reuters) – Warren Buffett said on Monday the U.S. economy is gradually improving, helped by the efforts of Federal Reserve Chairman Ben Bernanke to stimulate it.
Speaking on CNBC television, Buffett said the economy is benefiting from improvement in areas that had not previously performed well, particularly homebuilding.
He also said the improved economy is helping create increased traffic for NetJets, Berkshire’s private plane unit.
“The economy is moving forward, but at a slow pace,” he said. “Demand has come back, but slowly.” …”
Comments »Black Gold Pares Gains After Syria Accuses Israel of Air Strikes
“West Texas Intermediate crude headed for the biggest three-day gain in nine months as air strikes in Syria renewed concern that unrest will spread in the Middle East and disrupt supply.London’s Brent oil rose.
WTI futures climbed as much as 1.6 percent in New York after Syria’s state news agency said Israeli aircraft attacked a military research center on the outskirts of Damascus yesterday. The offensive was a “declaration of war,” Syria’s deputy foreign minister told CNN. Israel didn’t confirm involvement. The Middle East accounted for 33 percent of global crude output in 2011, according to BP Plc (BP/)’s Statistical Review of World Energy. WTI capped a second weekly gain May 3 after U.S. employment rose more than forecast.
“If the geopolitical events between Israel and Syria start to escalate, the market will automatically write in a premium and you should see a spike in the price of oil,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “The key on the topside is $98.50 and a break of that area may send the price to $100. Another couple of bombings and you will see it.”
WTI for June delivery gained as much as $1.56 to $97.17 a barrel in electronic trading on theNew York Mercantile Exchange and was at $96.23 at 3:12 p.m. Singapore time. The volume for all contracts traded was more than four times the 100-day average. Futures increased $1.62 to $95.61 on May 3, the highest close since April 2. Prices have risen 5.1 percent over the past three days, the most since August, and climbed 2.8 percent last week.
‘Dangerous Situation’…”
Comments »AU Rises on Signs the Selling is Over in ETFs
“Gold gained in New York on signs of a slowdown in investor sales of exchange-traded funds.
Assets fell about 0.5 metric ton to 2,262.148 tons on May 3, the smallest decline since holdings last gained on April 1, according to data compiled by Bloomberg. Prices have climbed the past two weeks on increased coin and jewelry demand.
“We need to see ETF redemptions slow down in order for the next leg higher.” said Xiang Nan, an analyst at Citics Futures Co., a unit of China’s biggest listed brokerage.
Gold for June delivery advanced 0.7 percent to $1,47.40 an ounce by 7:35 a.m. on Comex in New York. Prices slumped 13 percent over two days last month, the most in three decades.
Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., said he wouldn’t buy gold after the slump….”
Comments »France Declares Austerity Dead as Germany Offers Flexibility
“French Finance Minister Pierre Moscovici declared the era of austerity over after his German counterpart offered flexibility on deficit cutting amid renewed bickering between Europe’s two biggest economies.
“We’re witnessing the end of the dogma of austerity” as the only tool to fight the euro debt crisis, Moscovici said yesterday on Europe 1 radio. “We’ve been pleading for a growth policy for a year. Austerity on its own impedes growth.”
The gap between the French Socialist finance chief’s view and the election-year positioning of Germany’s Wolfgang Schaeuble underscores the divergence between their economies and the wrangling that has marked the crisis fight since Francois Hollande replaced Nicolas Sarkozy as French leader a year ago.
Coalition lawmakers in Germany are pushing back against the two-year extension for France to meet European Union deficit rules floated by Olli Rehn, the EU economic and monetary affairs commissioner.
“We made it clear to our government, the chancellor and finance minister that in the case of France a one-year delay to 2014 to fulfill the euro’s deficit rules is the absolute limit for us,” Norbert Barthle, budget-policy spokesman for Schaeuble’s Christian Democratic Union, said in a May 3 telephone interview from his constituency in southwestern Germany. “France must show that it’s willing to tackle structural reforms.”
Merkel’s Campaign…”
Comments »Italy’s Economy Expected to Slow More than EU Commission Estimates
“Italy’s economy will shrink this year more than the European Commission estimates as weak domestic demand and investment extend the country’s longest recession in more than two decades, the national statistics institute said.
Gross domestic product will decline 1.4 percent in 2013 before rising 0.7 percent next year, Rome-based Istat said in the institute’s annual report. Household consumption and corporate investments will both decline this year.
Istat’s GDP projections compare with forecasts by the European Commission for a 1.3 percent contraction this year and growth of 0.7 percent in 2014. The Organization for Economic Cooperation and Development said May 2 that the euro region’s third-biggest economy will shrink 1.5 percent this year and expand 0.5 percent next.
“In 2013 households will keep experiencing a further fall in available income with inevitably negative consequences on consumer spending,” today’s report said. “At the same time, a recovery in investment by companies appears unlikely because of the productive capacity utilization and of the persisting weakness of domestic demand.” …”
Comments »Euro Area Services Manufacturing Falls for a 15th Month Providing Weakness to Equities
“Euro-area services and manufacturing output shrank for a 15th straight month in April and retail sales fell in March as the 17-nation economy struggled to emerge from recession.
A composite index based on a survey of purchasing managers in the manufacturing and services industries increased to 46.9 last month from 46.5 in March, London-based Markit Economics said in a report today. While above an initial estimate of 46.5 published on April 23, it was still below 50, indicating contraction. Retail sales declined for a second month in March, another report showed.
The euro-area economy will shrink more than previously estimated in 2013 as part of a two-year slump that has pushed unemployment to a record high, the European Commission said on May 3. The European Central Bank last week reduced its key interest rate to an all-time low after confidence was shaken by political turmoil in Italy and a bailout of Cyprus.
“The financial markets appear to have survived the government debt crisis, but the leading economic indicators have recently declined,” said Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt. There is “a significant risk that, contrary to analysts’ expectations, the economy will not pick up in the spring,” he said.
Stocks Decline…”
Comments »Malaysian Election Helps Emerging Markets to Rally to a Seven Week High
“Emerging-market stocks rose to a seven-week high as Malaysian shares rallied to a record after Prime Minister Najib Razak won elections, U.S. jobs growth bolstered confidence in the global economy and higher oil prices lifted producers.
UEM Land Holdings Bhd. (ULHB) jumped 13 percent in Kuala Lumpur, while CIMB Group Holdings Bhd. (CIMB), Malaysia’s second-largest lender by assets, had its steepest gain since July 2003. The ringgit strengthened the most since 2010. OAO Rosneft, Russia’s largest oil company, advanced to a three-week high. Turk Hava Yollari AO (THYAO), Turkey’s flagship airline, headed for an all-time high.
The MSCI Emerging Markets Index gained 0.5 percent to 1,047.42 at 12:05 p.m. in London, the highest since March 14 on a closing basis. Najib’s coalition extended its 55-year rule, which may allow him to proceed with plans to narrow the budget deficit and boost investments. U.S. payrolls grew by 165,000 last month, more than economists estimated, the Labor Department said May 3.
“The election results in Malaysia were a positive surprise for investors,” Aldo Perkasa, who helps manage about $2 billion at PT Mandiri Manajemen Investasi, said by phone from Jakarta. “The U.S. employment data drove the overall macroeconomic sentiment higher.”
The FTSE Bursa Malaysia KLCI Index rose 3.4 percent, its steepest increase since November 2008 and the highest level on record. Russia’s Micex advanced for a second day, rising 0.3 percent and benchmark gauges in Turkey, Poland and South Africa added at least 0.5 percent….”
Comments »The Yen Falls for a Third Day Trying to Break 100 to the Greenback
“The yen fell for a third day, approaching 100 per dollar, as a decline in the U.S. jobless rate to a four-year low fueled optimism that growth is gathering pace, reducing demand for Japan’s currency as a haven.
The euro strengthened against the yen as data showed the region’s services and manufacturing industries shrank less in April than initially estimated. Australia’s currency slid after a report today showed retail sales shrank. The Malaysian ringgit rose to the highest in 1 1/2 years against the dollar after Prime Minister Najib Razak’s coalition was re-elected. Sweden’s krona weakened as a report showed the slump in the nation’s services eased less than economists predicted…”
Comments »The Aussie Dollar Trades Lower on Weak Retail Sales and No Easing Expectations
“Australia’s dollar fell after data showed retail sales unexpectedly contracted in March, adding to speculation a weakening economy will prompt the central bank to cut interest rates to a record low.
The so-called Aussie dropped to its weakest since October 2009 versus New Zealand’s dollar amid prospects monetary policy will diverge in the two nations over the coming year. There is a 53 percent chance that the Reserve Bank will lower its 3 benchmark rate tomorrow, according to Bloomberg calculations based on overnight-index swap rates.
“The Aussie will remain heavy and probably gravitate toward the downside following the retail sales number,” said Jim Vrondas, the Sydney-based chief currency and payment strategist at OzForex Ltd. “The RBA is unlikely to cut tomorrow, though they’ll probably maintain an easing bias. That should give the Aussie some support.”
The Australian dollar declined 0.5 percent to $1.0271 as of 5:4 p.m. in Sydney. It fell 0.1 percent to 102.03 yen. The Aussie slid to as low as NZ$1.2016, the weakest since October 2009, before buying NZ$1.2034, 0.5 percent lower than the May 3 close. New Zealand’s dollar rose 0.1 percent to 85.41 U.S. cents. The currency advanced 0.5 percent to 84.85 yen.
Policy Rates…”
Comments »Asia Trades Higher Without the Nikkei, Europe is Flat, and U.S. Futures are Unch
Yields for Italy, Spain, France, and Germany …
Comments »Documentary: How High Frequency Trading Works, Trading Speed, & The Flash Crash
Given it is a few days away from the third anniversary of the Flash Crash i thought it might be interesting to delve into the subject matter.
What is really interesting about this documentary is that pumping and dumping is explained in a nonchalant way…as if it were not illegal. Insane indeud!
Cheers on your weekend!
[youtube://http://www.youtube.com/ watch?v=NYWrtvSCziQ 450 300]Didn’t get enough, here is another video to chew on:
[youtube://http://www.youtube.com/watch?v=aq1Ln1UCoEU 450 300]
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Is Your Money in a Prison? The Tightening of International Money Flow
“The EU continues its chainsaw juggling act. The austerity pledge from France is holding about as well as its Maginot Line, while Greece has sworn to meet its fiscal targets in 2014 2015 2016soon, and the Italians promise they’re going to kick some serious fiscal butt as soon as the country returns from holiday.
Spain reassures that it will squarely confront its need to raise worker productivity whenever the unions call an end to protests against austerity. And the Portuguese high court ruled it is unconstitutional for civil servants to work for less than twice the wages of their private-sector counterparts.
This chronic “the sky is falling” in the EU had induced investor news-cycle fatigue and rendered last year’s black-swan threat level from red to this year’s collective yawn…
… until Cyprus tossed another chainsaw into the act. The Cyprus looting of private wealth was a cold-shower reminder of the tenuous security of assets that are concentrated within reach of a single government – doubly true of nations in a desperate fiscal situation whose financial sector is about to topple.
The blatant theft of depositor money in Cypriot banks was at first peddled as a one-off emergency measure. Then a Freudian slip by the head of the Eurogroup finance ministers, Mr. Dijsselbloem, suggested this would be the new pattern for similar future events. Much back-pedaling and “clarification” ensued.
But don’t bother squinting as you try to read the lips of mumbling bureaucrats. Just follow what they’re doing and you won’t get blindsided.
What have they been up to? In October 2011, the Financial Stability Board (FSB) – a tentacle of the Bank for International Settlements, the central bank for central bankers – released a report that proposed a new regime to resolve financial-institution instability.
In the report, the FSB calls for solvency support for banks without taxpayer exposure and the allocation of losses to shareholders and unsecured and uninsured creditors. Deposits at a bank are considered a loan, and if a bank fails, its depositors become unsecured creditors for amounts that exceed the insurable limit.
It gets worse. To protect the integrity of the financial system, controls on both endogenous (the bank itself) and exogenous (other firms and cross-border cooperation) capital movement can be implemented. This is exactly what happened in Cyprus. To prevent capital flight out of the banking system, the movement of money out of or between banks was restricted, as well as capital sent outside the country.
The G20 has fully endorsed the plan, and its implementation is complete or under way in member jurisdictions. The US is a G20 member, so don’t kid yourself into believing it can’t happen in America. It can and will. The Cyprus event has been carefully framed as an anomaly when in fact it is part of a well-orchestrated script.
In the Year of Our Overlord 1 AF
January 1, 2014, will mark the start of Year 1 AF – “after FATCA.” In the run-up to the US reporting regime’s full implementation, many foreign banks have opted not to accept US persons as clients, and we can see why. FATCA is a huge burden on foreign financial institutions in terms of time and resources needed to identify, track, and report on their US clients….”
Comments »Lessons From Past DOW Milestones
“Stocks rose to new highs Friday following the upbeat jobs report, with the Dow Jones Industrial Average briefly touching 15,000 and the S&P 500 moving above 1600.
The latest milestone for the Dow comes six years after it first closed above another threshold,14,000, in July 2007, the Wall Street Journal points out. While such records don’t necessarily signify a shift in market sentiment, experts say such milestones can have a psychological impact on investors. As the Dow reclaims lost ground, some investors are reflecting on how far they’ve come since the financial crisis.
Investors were applauding the news Friday that the unemployment rate reached its lowest level since 2008 in April after adding 165,000 jobs, more than expected. But for all the excitement around market milestones, investing pros say these thresholds don’t really influence the market’s direction. While investors often get swept away when the market is near key thresholds, analysts it’s the fundamentals like stock valuations, economic growth and earnings that decide market performance in the end.
Here’s a look back at some of the Dow’s biggest milestones, what happened next — and what lessons were learned….”
Shitcoin Exchange Hit With a $75m Lawsuit
“A lawsuit against Bitcoin’s main trading exchange Mt. Gox was filed this week regarding rights to the North American market. And no, the plaintiff is not seeking damages in Bitcoins.
CoinLab, backed by venture capitalist Peter Vessenes, said it entered into anagreement with Mt. Gox in November that gave CoinLab access to Mt. Gox’s technology – its computer servers and the “exclusive right to certain intellectual property” – so that CoinLab could provide exchange services to North American customers as Mt. Gox’s exclusive partner in the region. Mt. Gox is based in Japan.
Transactions in the U.S. and Canada through Mt. Gox were switched to CoinLab as of March 29, according to a press release from CoinLab.
The suit alleges that Mt. Gox beached its contract with CoinLab by conducting business with North American customers and failing to provide necessary data, according to a complaint filed by CoinLab in federal court.
CoinLab is seeking at least $75 million in damages.
“Defendants have, in email and other written exchanges, and in public statements to the press acknowledged that they have directly serviced customers in the United States and Canada since entering the Agreement. This conduct constitutes a breach of the Agreement, including the exclusivity provisions in the Agreement,” the filing states.
CoinLab’s Vessenes said in the statement: ” What tipped us into filing was our complete inability to get Mt. Gox to deliver on the few simple things left that were needed for customers to move over en-masse” …”
Comments »Copper is Up HUGE….Good or Bad Sign ?
“If copper’s a good indicator for economic trends and equity markets, then it may be sending investors a warning of bad things to come.
Prices for copper futures saw a big rally on Friday, but that doesn’t make up for its year-to-date loss. The July copper contract HGN3 +6.43% settled at $3.315 a pound on Comex, up 21 cents, or 6.8%, for the session. It’s still trading down roughly 10% for the year.
Copper, which is also known as “Dr. Copper” because of its ability to serve as an indicator, is “leading the way downward,” Albert Edwards, a strategist at Societe Generale, told clients in a research note dated Thursday.
“Copper is acting exactly as it did when I wrote about the impotence of liquidity in the face of the (then imminent) 2007 recession,” said Edwards. “It is giving us an early warning that liquidity will not save risk assets: time to get out of equities.” …”
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