The Aussie and Kiwi Dollars Fall on Potential Easing in Australia

“Australia’s dollar fell against all of its major peers, erasing earlier gains, after the central bank signaled it’s prepared to cut interest rates to a record- low this year after holding them unchanged today.

The inflation outlook “would afford scope to ease policy further, should that be necessary to support demand,” the Reserve Bank of Australia said in a statement today after today’s policy decision. Australia’s bonds rallied and New Zealand’s dollar fell as declines in global stocks demand boosted demand for haven assets.

“Aussie selling pressure stems from the comments that the RBA made that inflation outlook gives scope for further easing,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “The market has taken that to mean the RBA is sitting ready to ease.”

RBC expects the next interest rate cut to come in the second quarter, according to Trinh.

The Aussie fell 0.3 percent to $1.0404 at 4:50 p.m. in Sydney from yesterday, after earlier climbing as much as 0.2 percent. It declined 0.3 percent to 96.12 yen, after touching 97.08 in New York, the highest since August 2008. New Zealand’s kiwi dollar slid 0.1 percent to 84.20 U.S. cents from yesterday. It was down 0.1 percent at 77.80 yen.

The yield on Australia’s 10-year bonds fell 10 basis points, or 0.10 percentage point, to 3.49 percent from yesterday, when it touched 3.61 percent, the highest level since May 2.

The MSCI Asia Pacific Index of stocks lost 0.9 percent, following a 1.2 percent decline in theStandard & Poor’s 500 Index (SPX) yesterday. The Stoxx Europe 600 Index (SXXP) dropped 1.5 percent yesterday.

RBA Decision…”

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“Australia posted its narrowest trade deficit in 10 months and home prices jumped by the most in 2 1/2 years, supporting the case for the central bank to leave interest rates unchanged today.

Imports outpaced exports by A$427 million ($446 million), led by stronger iron-ore shipments, from a revised A$2.79 billion deficit in November, the Bureau of Statistics said in a report in Sydney today. A separate report showed house prices advanced 1.6 percent in the three months through December, the most since mid-2010.

Investors are pricing in a 78 percent chance central bank Governor Glenn Stevens will leave the overnight cash-rate target at 3 percent, pausing after six reductions totaling 1.75 percentage points since November 2011. The Reserve Bank of Australia releases its first monetary policy decision of the year at 2:30 p.m. in Sydney.

“The data are pretty positive,” said Alvin Pontoh, an Asia-Pacific strategist at TD Securities Inc. in Singapore.’’ “The increase in house prices certainly supports the RBA remaining on hold.”

The Australian dollar rose to $1.0444 at 12:30 p.m. in Sydney, from $1.0442 before the data were released.

The median estimate in a Bloomberg News survey of 24 economists was for a trade shortfall of A$800 million. For the house-price report, the median forecast of 15 economists was a 0.3 percent rise.

Iron Ore, Coal…”

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“Australia’s central bank held its benchmark interest rate at the half-century low reached in 2009 and said it has room to cut to a record as a weak labor market contains inflation. Bond yields and the local currency fell.

“The inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand,” Governor Glenn Stevens said in a statement today in Sydney after leaving the overnight cash-rate target at 3 percent. “Looking ahead, with the labor market softening somewhat and unemployment edging higher, conditions are working to contain pressure on labor costs.”

The nation’s currency weakened as Stevens’s statement indicated a willingness to underpin growth and repeated concern about the local dollar’s sustained strength. TheReserve Bank of Australia chief said the economy will likely expand “a little below trend” in the coming year, a lessoptimistic view than the one he released two months ago.

“We expected that recent optimism around the world economy would not be sufficient to change the bank’s clear bias to further cut rates,” said Bill Evans, chief economist at Westpac Banking Corp. (WBC) in Sydney. “There was considerable encouragement in the statement for our near-term view that they will decide to cut rates by 25 basis points at the next meeting.”

Today’s decision to pause was predicted by 24 of 28 economists surveyed by Bloomberg, with the rest forecasting a 0.25 percentage point cut.

Durable Demand….”

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“Toyota Motor Corp. (7203), the world’s largest carmaker, counts on the Camry sedan and the Prius hybrid to outsell other automakers. For profits, it’s counting on Prime Minister Shinzo Abe and his campaign to cheapen the yen.

“Ever since the new government took control, it feels as though Japan is filled with the spirit for economic revival,” Toyota Senior Managing Officer Takahiko Ijichi said in a briefing in Tokyotoday. “Some say that they can’t feel any real substance in the whole ‘Abenomics’ phenomenon, but as a result, it’s weakened the yen and boosted stock prices.”

Toyota, which today raised its profit forecast to a five- year high, is leading the revival of Japan Inc. (NKY) as the weakening local currency attracts investors and drives up stocks to levels last seen in 2008. Behind the recovery is the new prime minister, whose calls for monetary easing have helped the yen weaken against all other currencies since mid-November, making Japanese products from cars to vacuum cleaners more profitable overseas.

“Abenomics has proven to be a great plus to Japanese companies,” said Masayuki Kubota, who helps oversee the equivalent of $1.8 billion at Daiwa SB Investments Ltd. in Tokyo. “The biggest result we’re seeing is in the foreign exchange and stock market.”

Japan’s biggest manufacturer raised its forecast for net income in the year ending March by 10 percent to 860 billion yen ($9.3 billion). Toyota climbed as much as 2 percent in German trading after the company reported earnings following the close of trading in Tokyo, where the stock dropped 1.2 percent to 4,540 yen….”

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“The euro rose toward the strongest level in more than 2 1/2 years versus the yen as apurchasing managers’ index showed services output in the region shrank less than initially estimated, boosting demand for the currency.

The 17-nation euro reversed an earlier decline as European stocks rallied from their biggest plunge in more than three months. European Central Bank policy makers are due to meet this week. Australia’s dollar weakened after the central bank said the inflation outlook allowed scope for further interest-rate cuts. The yen fell at least 0.6 percent against all 16 of its major peers after Bank of Japan (8301) governor Masaaki Shirakawa said he will step down earlier than previously planned.

“The final PMI readings for Europe were obviously on the stronger side of expectations, so that has provided a bit more of a boost for the euro,” said Ian Stannard, the head of European foreign-exchange strategy at Morgan Stanley in London. “The underlying trend in the euro is still up but we need to be cautious going into the ECB meeting.”

The euro rose 1.4 percent to 126.56 yen at 8 a.m. New York time. It touched 126.97 yen on Feb. 1, the strongest since April 2010. The shared currency strengthened 0.2 percent to $1.3544, after dropping to $1.3459, the lowest since Jan. 29. The yen slid 1.1 percent to 93.43 per dollar.

The JPMorgan G7 Volatility Index, calculated based on premiums on currency options, climbed to 9.3 percent, the most since Aug. 2. It had dropped to a more than five-year low of 7.06 on Dec. 18.

The shared currency may slide to $1.3350 in the days before the ECB meeting, before rising to as much as $1.40 in the following weeks, Stannard said.

Purchasing Managers

An index based on a survey of purchasing managers in the services industry rose to 48.6 from 47.8 in December, London- based Markit Economics said in a report today. That’s above an initial estimate of 48.3 published on Jan. 24. A reading below 50 indicates contraction. A composite index of factory and services output increased to 48.6 from 47.2….”

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“European stocks rebounded from their biggest drop in three months yesterday, while Italian two-year notes recovered after yields reached a one-month high. Oil advanced while the yen weakened.

The Stoxx Europe 600 Index (SXXP) rose 0.7 percent at 7:25 a.m. in New York. Standard & Poor’s 500 Index futures gained 0.5 percent. Italy’s two-year note yield slid 11 basis points to 1.62 percent after earlier reaching 1.77 percent, the highest since Jan. 3, while the cost of credit-default swaps insuring European investment-grade debt slid from the highest level in almost two months. The yen declined at least 0.4 percent against its major peers after Bank of Japan Governor Masaaki Shirakawa said he would step down next month. Oil climbed 0.6 percent.

Stocks are rallying after global equity markets slumped the most this year yesterday and the S&P 500 had its steepest drop since November on renewed concern Europe’s debt crisis will intensify. Companies from Munich Re to ARM Holdings Plc (ARM) posted results that beat estimates and data today showed European services output shrank less than initially estimated. U.S. service industries probably grew last month at about the same pace as in December, economists said before a report today.

“The markets seem to be rebounding from what was probably an overdone move yesterday,” Lorne Baring, managing director at B Capital SA in Geneva, which oversees almost $500 million, said in a phone interview. “Sentiment is positive at the moment and earnings have generally beat expectations. This opens the way for the U.S. market to continue its upward trend.”

Results Beat…”

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“Japanese shares fell, with the Nikkei 225 (NKY) Stock Average retreating from its highest in 32 months, as Hitachi Ltd. and Fujikura Ltd. cut their forecasts and concern about Europe’s debt crisis deepened.

Hitachi, a maker of electronics and machinery, declined 6.4 percent, while cable-manufacturer Fujikura tumbled 7.3 percent. Konica Minolta Holdings Inc. (4902), a producer of imaging equipment that gets 28 percent of its sales in Europe, dropped 3.1 percent. Nippon Sheet Glass Co. (5202) led gains on the Nikkei 225 after Daiwa Securities Group Inc. (8601) recommended the shares. Toyota Motor Corp. (7203) slid 1.2 percent before posting earnings at the close.

The Nikkei 225 lost 1.9 percent to 11,046.92 in Tokyo after yesterday closing at its highest since April 15, 2010. Volume was about 65 percent above the 30-day average for the time of a day. The broader Topix Index fell 1.7 percent to 939.70, with about four stocks dropping for each that gained.

“Investors are using the European issue as an excuse to adjust their positions,” said Hitoshi Asaoka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s third-largest bank by market value. “Investors are also paying attention to factors for individual stocks.”

The Topix has surged 30 percent since Nov. 14, when national elections were announced on optimism Prime Minister Shinzo Abe’s new government will take steps to fight deflation. The gauge is trading at 1.11 times book value, compared with 2.07 for the Standard & Poor’s 500 Index and 1.47 for the Stoxx Europe 600 Index.

Of the 159 companies on the Topix that have reported earnings so far this quarter and for which Bloomberg has estimates, 61 percent have exceeded profit expectations. Some 52 percent missed sales projections, the data show.

Lower Expectations…”

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World Markets

Currencies

Commodities

USD Libor

Euribor

Yields for Italy, Spain, France,  and Germany …

YUM, BIDU, GILD, APC, HIG, THOR, EW, SWY, TPX, & LTD,

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“WASHINGTON (Reuters) – A gauge of U.S. business investment plans dropped in December, a possible sign companies were losing confidence in the economy’s strength due to fears over tighter fiscal policy, government data showed on Monday.

The data from the Commerce Department also gave some positive signals, with a big jump in defense industry orders suggesting some of the surprise fall in U.S. economic output late last year was poised to reverse.

Many economists have expected businesses to invest more timidly because of uncertainty overgovernment spending cuts and tax increases, which had been scheduled to kick in last month. Congress ultimately struck a last-minute deal to avoid or postpone many of the austerity measures.

Signs of any blow to confidence have been difficult to discern from economic data, but Monday’s data provided a hint of weakness in December.

The government issued a revised estimate for capital goods orders outside of the defense and aircraft industries, showing they edged 0.3 percent lower in December.

Previously, the government had estimated this closely watched proxy for investment plans had gained 0.2 percent during the month.

U.S. stocks opened lower on Monday, while U.S. Treasuries prices rose.

Overall factory orders rose 1.8 percent during the month. That was below the median forecast of 2.2 percent by analysts polled by Reuters.

Outside of the transportation industry, growth in factory orders rose a meager 0.2 percent in December, with new orders for consumer goods down 0.1 percent.

More volatile components helped make up for that softness, with civilian aircraft orders up 10.1 percent….”

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“The devil is always in the details.

While many opponents of the Affordable Care Act have been busy stressing over the penalty they would be required to pay should they fail to purchase health insurance come 2014, it turns out that the IRS is clearing the way to reduce the number of Americans subject to the penalty—while making it near impossible for millions of people to afford suitable coverage for their families, subverting the very purpose of the law itself.

It begins with a poorly drafted provision in the healthcare reform law stating that individuals who receive their health insurance as a benefit of employment will be permitted to take a pass on their company policy and elect to buy their coverage on the health exchange—allowing them to take advantage of the federal healthcare subsidies available to low and middle income Americans—if their company provided health insurance policy is deemed ‘unaffordable’.

‘Unaffordable’ is defined as requiring the employee to pay more than 9.5% of the employee’s household income towards his or her employer provided healthcare benefit.

As an example, let’s take an employee who earns $35,000 a year. According to the IRS rule, if that employee is paying less than $3,325 a year towards their healthcare benefit, that employee will be required to stick with the company health insurance policy and would be barred from taking advantage of the federal subsidies available in the form of tax credits that the exchanges have to offer.

The Kaiser Family Foundation’s 2012 survey of what employees pay towards their employer provided healthcare benefit reveals that the average, individual employee made an annual contribution of $951 towards their health benefit. Thus, there would not appear to be much of a problem here.

But this is where it gets ugly…

The same Kaiser Family Foundation survey reveals that the average contribution of employees who are paying towards a family policy is $4316 a year—a number well in excess of the 9.5% of earnings for someone making just $35,000 a year…”

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It the economy was not already hard enough for many distinguished citizens to have to resort to menial jobs like flipping burgers, well now those jobs may be going by way of the robot.

A new robot has the ability to serve up 360 burgers per hour.

Full article 

[youtube://http://www.youtube.com/watch?v=kEDmj3qocag 450 300]

Link for iPhone users: http://www.youtube.com/watch?v=kEDmj3qocag

“A decade ago, I concluded that we were in the early stages of a secular bear market, and that investors needed to adjust their risk postures accordingly. Back in December 2003, I penned a piece for the Stock Trader’s Almanac, titled Managing the Very, Very Long Term, based on this blog post from November 2003.

Long time readers know this is a major theme to for me. Much of my commentary, presentations and investing posture has been about longer term, secular cycles. Search the Big Picture for the phrase “secular bear market” and 659 results come up (in quotes, 130).

Here’s what I wrote back in 2003:

“The panoramic view leads me to the present conclusion. Following an 18-year Bull market [1982-2000], and a three year Bear market, we are now committed to what looks like a long-term military obligation in Iraq. In the grand scheme of things, I suspect we are in for a harder long-term slog than the mere 3 year Bear market suggests.

Historically, this suggests an extended period of range bound trading as the highest probability long-term scenario in my view. I expect vicious rallies, and wicked sell-offs to occur — over shorter term cycles — within the larger timeline. Active management and capital preservation are going to be the key methods of outperformance.”

Let’s put this into more specific quantitative terms. According to data from Fidelity:

• Average secular bull market lasted 21.2 years and produced a total return of 17.2% in nominal terms and 15.9% in real terms. The market’s P/E more or less doubled, from 10.1 at the start to 20.5 at the end.

• Average secular bear market lasted 14.5 years and had a nominal total return of +1.0% and a real return of –2.3%. The market’s P/E compressed by an average of 9 points, from 20.5 at the start to 11.3 at the end.

Here we are, a few weeks away from the start of the 14th year of the secular Bear market that began March 2000. The question on more than a few peoples’ minds has been whether or not it is reaching its end.

To answer that question, we need to understand exactly what a secular bear market is. Over the years, I have developed a my own definition of Secular Bear Markets…”

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“One of the challenges in life is to know the difference between a cyclical slump and a transformation that will permanently change a business, industry, economy, lifestyle, living standard, a family’s prospects or the future of a nation-state.

Harvard Professor Clay Christensen explained the difference, in the business world, with his 1997 breakout book “The Innovator’s Dilemma”. I interviewed him at Harvard in 2005 about his theory of disruptive innovation and how the failure to recognize the dangers, and opportunities, in changing circumstances have devastated many industries from steel to retail, telecoms, the media and others.

All these sectors failed to recognize the signs or patterns that revealed the fact that changes were permanent and required recalibration and reframing of the industry, business and mentalities of all involved.

Last week in Davos, Professor Christensen elaborate his theory to include macro-economics and markets. As with the invention of the PC or Internet or mini steel mill, the current economic conditions are transformative and require recalibration and reframing of strategies, policies and political judgment.

He calls it the “capitalist’s dilemma” and said that the relatively jobless economic recovery in the U.S. and elsewhere is the new normal, and presents serious political and social consequences. Some 204 million people remain unemployed worldwide, in large measure due to the 2008 meltdown, but there are other reasons, he pointed out.

“Whatever happens on Election Day,” wrote Christensen in the New York Times just before the voting, “Americans will keep asking the same question: When will this economy get better?”

Christensen is not an ideologue. He analyses facts, not opinions, and has figured out why low or no interest rates on capital has caused a timid recovery with mediocre job growth. The old paradigm was that give away cheap money and the enterprising, and enterprises, will innovate and create jobs and gobs of economic activity.

Perhaps the sluggishness is due to the fact that trillions in debts are being paid down after America’s spending binge. But that’s only a small part of the story, he said. Trillions remain on the sidelines earning low interest, or invested in stock markets with hedge funds.

“Even if there is robust growth there won’t be job creation,” he said.

This is because the challenge is not framed properly. Policymakers must differentiate – by providing tax or other incentives — between three categories of innovation in other to “unlock the type of innovation capital” that creates real wealth for an economy or industry or business….”

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“…….The impulse trend elliott wave pattern chart suggests that the stock market is converging towards a 5th wave peak. Given the length of Impulse waves 1 and 3 this implies a peak between Mid March and Mid May 2013. With this trend targeting a range of Dow 14,300 to 14,500.

The implications are clear that following a 5th wave peak (unless it morphs into a 7th wave extension, with elliott wave you never know until after the fact!) That the stock market looks set to have a significant correction that is likely to exceed the size of Wave 2 and wave 4 corrections, i.e. more than 1000 Points, suggesting an ultimate decline of approx 1,500 off of the Peak. So a 14,500 peak would imply 13000.

Elliott Waves – Sub Impulse

Zooming in implies we are in sub impulse wave 3 that should end imminently. However the more important implication is for a bullish trend towards 14,300 to 14,500 by Mid to late March 2013….”

Full article and charts

“FedEx Corp. (NYSE: FDX) may be about to become a huge beneficiary of the transportation catch-up boom taking place in America and elsewhere. Bank of America/Merrill Lynch has added the shipping and transport giant to its prized US 1 List, which is the equivalent to what investors know as a Conviction Buy List.

FedEx shares remain one of BofA’s top transportation stocks. The firm noted that it trades at only 12.7 times its fiscal 2014 earnings per share estimates. This is said to be under the historical 13 times to 20 times one-standard deviation trading range.

BofA said:

Earlier this month, we highlighted improving freight data from Asia, including Hong Kong Air Cargo Terminals, as well as accelerating China port volumes, which we believe drove a large portion of FDX’s 12% gain year-to-date. FedEx posted its first uptick in International Priority volumes in 5 quarters in its F2Q13. Last week, UPS noted that in the U.S., January started off stronger than it expected, Europe is more stable than last year and is improving, and Asia global growth trends have returned to more normal trends. We believe the upside from FedEx’s $1.7 billion profit improvement plan, which should gain visibility in May, is just beginning to make inroads with investors, and provides upside potential….”

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