Category: zerohedge

Presented with no comment…

 

 

(h/t @Not_Jim_Cramer)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/znXoz3Bfr54/story01.htm Tyler Durden

On a below average volume day, there were three intriguing divergences across asset classes today. Thanks to CVX (and a few others including MSFT) the megacaps of the Dow Industrials lurched to new record highs as the Transports dropped their most in a month and the momo names (led by TSLA) took high-beta NDX and RUT down on the day. Another divergence was oil (which surged notably) and copper (which was pummeled) as gold and silver limped higher (on weaker USD ahead of tomorrow's rumored 'no cut' ECB meeting). The last notable divergence was in the Treasury complex where the long-bond continues to push higher in yield while 'forward-guidance' belief is dragging the front-end lower in yield (5s30s now 10bps steeper on the week).

 

Dow Industrials hold most of their gains to close at new record highs… but Trannies (worst day in a month) and Nasdaq (TSLA) stumbled… chatter is that the big tech momos were sold to make room for TWTR – not so sure…

 

In Treasury land, the curve is steepening rather notably since Goldman's Taper/forward-guidance/threshold-adjustment note…

 

In commodities, the divergence between copper (ungrowth) and oil (growth/flation) was notable – as gold/silver limped higher…

 

The short squeeze of the "most shorted" names into last night's TSLA earninsg appears to have imploded and today saw "most shorted" names dropped the most in a month…

 

 

Note – only 1 of 16 IPOs rose on the day today…

 

Charts: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/v3aC71u2miI/story01.htm Tyler Durden

On a below average volume day, there were three intriguing divergences across asset classes today. Thanks to CVX (and a few others including MSFT) the megacaps of the Dow Industrials lurched to new record highs as the Transports dropped their most in a month and the momo names (led by TSLA) took high-beta NDX and RUT down on the day. Another divergence was oil (which surged notably) and copper (which was pummeled) as gold and silver limped higher (on weaker USD ahead of tomorrow's rumored 'no cut' ECB meeting). The last notable divergence was in the Treasury complex where the long-bond continues to push higher in yield while 'forward-guidance' belief is dragging the front-end lower in yield (5s30s now 10bps steeper on the week).

 

Dow Industrials hold most of their gains to close at new record highs… but Trannies (worst day in a month) and Nasdaq (TSLA) stumbled… chatter is that the big tech momos were sold to make room for TWTR – not so sure…

 

In Treasury land, the curve is steepening rather notably since Goldman's Taper/forward-guidance/threshold-adjustment note…

 

In commodities, the divergence between copper (ungrowth) and oil (growth/flation) was notable – as gold/silver limped higher…

 

The short squeeze of the "most shorted" names into last night's TSLA earninsg appears to have imploded and today saw "most shorted" names dropped the most in a month…

 

 

Note – only 1 of 16 IPOs rose on the day today…

 

Charts: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/v3aC71u2miI/story01.htm Tyler Durden

 

The market is overpriced, to be sure. I’m gauging this on the single most important valuation metric in finance: the cyclically adjusted price-to-earnings ratio or CAPE ratio.

 

Generally speaking, most investors price a company based on its current Price to Earnings or P/E ratio. Essentially what you’re doing is comparing the price of the company today to its ability to produce earnings (cash).

 

However, corporate earnings are heavily influenced by the business cycle.

 

Typically the US experiences a boom and bust once every ten years or so. As such, companies will naturally have higher P/E’s at some points and lower P/E’s at other. This is based solely on the business cycle and nothing else.

 

CAPE adjusts for this by measuring the price of stocks against the average of ten years’ worth of earnings, adjusted for inflation. By doing this, it presents you with a clearer, more objective picture of a company’s ability to produce cash in any economic environment.

 

I mentioned before that CAPE is the single most important metric for long-term investors. I wasn’t saying that for impact.

 

Based on a study completed Vanguard, CAPE was the single best metric for measuring future stock returns. Indeed, CAPE outperformed

 

1.     P/E ratios

2.     Government Debt/ GDP

3.     Dividend yield

4.     The Fed Model,

 

…and many other metrics used by investors to predict market value.

 

So what is CAPE telling us today?

 

 

Today the S&P 500 has a CAPE of over 24.  This means the market as a whole is trading at 24 times its average earnings of the last ten years.

 

Put another way, if you bought the entire stock market today, it would take you roughly 24 years to make your money back.

 

That’s expensive. Indeed, the market has only been this expensive a handful of times in the last 100+ years. Every time we’ve been closer to a market top than a new bull market run.

 

For a FREE Special Report outlining how to protect your portfolio a market collapse, swing by: http://phoenixcapitalmarketing.com/special-reports.html

 

Best Regards,

 

Phoenix Capital Research

 

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/UFR6lAvtqg0/story01.htm Phoenix Capital Research

 

The market is overpriced, to be sure. I’m gauging this on the single most important valuation metric in finance: the cyclically adjusted price-to-earnings ratio or CAPE ratio.

 

Generally speaking, most investors price a company based on its current Price to Earnings or P/E ratio. Essentially what you’re doing is comparing the price of the company today to its ability to produce earnings (cash).

 

However, corporate earnings are heavily influenced by the business cycle.

 

Typically the US experiences a boom and bust once every ten years or so. As such, companies will naturally have higher P/E’s at some points and lower P/E’s at other. This is based solely on the business cycle and nothing else.

 

CAPE adjusts for this by measuring the price of stocks against the average of ten years’ worth of earnings, adjusted for inflation. By doing this, it presents you with a clearer, more objective picture of a company’s ability to produce cash in any economic environment.

 

I mentioned before that CAPE is the single most important metric for long-term investors. I wasn’t saying that for impact.

 

Based on a study completed Vanguard, CAPE was the single best metric for measuring future stock returns. Indeed, CAPE outperformed

 

1.     P/E ratios

2.     Government Debt/ GDP

3.     Dividend yield

4.     The Fed Model,

 

…and many other metrics used by investors to predict market value.

 

So what is CAPE telling us today?

 

 

Today the S&P 500 has a CAPE of over 24.  This means the market as a whole is trading at 24 times its average earnings of the last ten years.

 

Put another way, if you bought the entire stock market today, it would take you roughly 24 years to make your money back.

 

That’s expensive. Indeed, the market has only been this expensive a handful of times in the last 100+ years. Every time we’ve been closer to a market top than a new bull market run.

 

For a FREE Special Report outlining how to protect your portfolio a market collapse, swing by: http://phoenixcapitalmarketing.com/special-reports.html

 

Best Regards,

 

Phoenix Capital Research

 

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/XAvBFXBFGpE/story01.htm Phoenix Capital Research

If ever there was a symptom of the instant gratification meme of the new normal (why wait when you can have it all now?), it is ‘vice’. That is why Southbay Research’s Vice Index (composed of prices paid, volume, and frequency of sales in liquor sales, gambling, and prostitution) is so worrisome, as WSJ reports, “it’s signalling that consumer spending growth is about to drop and stay subdued for a few months.” Southbay’s Zatlin notes that measuring this kind of discretionary spending provides a window into the true state of the economy – which fits with recent macro data on retail sales (and forecasts for the holiday season as hope of the ‘second-half’ recovery fade quietly into next year.

 

 

Via WSJ,

Looks like it’s not going to be such a hot holiday season for liquor companies, casinos, and prostitutes – at least according to the latest reading of the “Vice Index.”

 

The index – a concoction from SouthBay Research’s Andrew Zatlin measures actual spending levels – yes, on vices – and uses the numbers to show where the economy is headed.

 

…

 

“It’s signalling that consumer spending growth is about to drop and stay subdued for a few months,” he wrote in a note to clients.

 

The index measures spending on things like prostitution, liquor sales, and gambling; it measures prices paid, the volume and frequency of sales (Mr. Zatlin doesn’t disclose exactly how he tracks these). Measuring this kind of discretionary spending, he says, provides a window into the true state of the economy.

 

…

 

The vice index seems to jibe with recent government data. The September retail sales report from the Census Bureau showed spending had slipped from August, and was up about 3% from a year ago. Along with recent reports on business spending, it all points to a pretty languid economy, and certainly not the “second-half recovery” that had been bandied about back in the spring.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/vgLIahpPYfw/story01.htm Tyler Durden

Venezuelan President Maduro is on the wires confirming that all is well in the nation – nothing to see here…

• *VENEZUELA’S MADURO ANNOUNCES ‘NEW PHASE’ TO STABALIZE ECONOMY
• *VENEZUELA’S MADURO SAYS HE’LL MAKE ECONOMIC ANNOUNCEMENTS
• *BLACK MARKET FX RATE IS HARMING VENEZUELA ECONOMY: MADURO
• *VENEZUELA TO START OPERATION AGAINST SPECULATION, MADURO SAYS

Yep, so after a 475% rise in the Caracas Stock Index YTD, he sees ‘speculation’ and will announce some ‘economic fixes’… this should be good…

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/5NiW-j2iW2k/story01.htm Tyler Durden

Venezuelan President Maduro is on the wires confirming that all is well in the nation – nothing to see here…

• *VENEZUELA’S MADURO ANNOUNCES ‘NEW PHASE’ TO STABALIZE ECONOMY
• *VENEZUELA’S MADURO SAYS HE’LL MAKE ECONOMIC ANNOUNCEMENTS
• *BLACK MARKET FX RATE IS HARMING VENEZUELA ECONOMY: MADURO
• *VENEZUELA TO START OPERATION AGAINST SPECULATION, MADURO SAYS

Yep, so after a 475% rise in the Caracas Stock Index YTD, he sees ‘speculation’ and will announce some ‘economic fixes’… this should be good…

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/5NiW-j2iW2k/story01.htm Tyler Durden

Over the past year there has been some confusion about whether Ben Bernanke has managed to not only completely break the stock market (which, if one harkens back to hallowed antiquity used to discount good or bad news in the future, and “trade” accordingly), but also invert it fully. The chart below from Guggenheim will once and for all put any such confusion to rest.

As Guggenheim’s Scott Minderd points out “The 52-week correlation between S&P 500 returns and the change in the Citigroup Economic Surprise Index has plunged from 0.45 to -0.13 over the past 12 months. A negative correlation indicates that weak U.S. economic data tends to push equity prices higher, while strong economic data tends to send them lower.”

What’s the explanation?

In a similar manner to 2005, when the Federal Reserve raised interest rates by 200 basis points in a year, the current plunge in this correlation indicates that the expectation of continued monetary accommodation has trumped economic fundamentals to become the main factor determining the near-term outlook for U.S. equities.

In short: a broken, inverted market, driven purely and entirely by hopes of an even bigger liquidity bubble, and even more greater fools to offload to.

And that, in a nutshell, is your “market.”

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/3CoIGprTaWw/story01.htm Tyler Durden

With only 3 of 70 economists surveyed by Bloomberg expecting a rate cut at tomorrow's ECB press conference, Credit Agricole's Frederik Ducorzet suggests seven signals to watch for from Draghi that could signal ECB easing ahead. Crucially, as BofAML puts it, "further euro appreciation is a problem, particularly for the periphery," and with empirical Phillips curves in hand, there is little room for further compensation via wage reduction. In other words, if Draghi stands pat (or doesn't offer up some sacrificial forward guidance hint of easing being likely), the drumbeat of social unrest in the periphery will grow ever louder.

 

These 7 signals should be watched for carefully, according to Credit Agricole's Frederik Ducrozet, as hints that further ECB easing is on its way…

For ECB refinancing rate cut to be delivered in December, following conditions need to be met:

1. Explicit hint about rate cut discussion if asked whether decision was unanimous

 

2. Signal may be conditional on Dec. staff forecasts

 

3. Hint toward likely shift in balance of risks to price stability/reference to FX and oil prices on inflation

 

4. Keeping deposit rate at zero

Draghi may become more explicit on ECB’s liquidity plans:

5. Explicit reference to LTRO, reduction in reserve requirements or suspension of SMP sterilization may have greatest market impact

 

6. Market may be disappointed if ECB says it remains attentive to money market conditions without more details

 

7. Easy solution would be extension of fixed-rate full allotment regime in 2015

 

Which is crucial, for a s BofAML notes, while the euro is not overvalued, it is close to the upper end of its equilibrium range. Therefore, the euro area can afford a stronger euro, but not a much stronger euro. However, their evidence suggests a much lower euro threshold for the periphery, with little room to compensate with wage reductions.

 

 

 

Our estimates suggest that a further euro appreciation by about 3% in real effective terms would bring the currency to the early stages of an overvalued territory.

Moreover, the strength of the euro this year has already started offsetting the periphery's competitiveness gains, which the region achieved during a painful adjustment in recent years.

The chart above shows equilibrium estimates for the euro area and selective member countries, using the IMF's CGER methodology, which combines a number of equilibrium measures. According to our estimates, the euro is currently overvalued by about 7%.

However, our estimates also suggest that the euro could soon become overvalued if it continues appreciating. Moreover, the euro is already overvalued (beyond the ±10% range) from the point of view of Greece, Ireland and Spain. And PPP estimates suggest that the euro is overvalued by 20% against the USD.

The periphery cannot afford a much stronger euro

The strength of the euro is partly offsetting the competitiveness improvements that the periphery has achieved in recent years. Our estimates suggest that the euro is already too strong for Greece, Ireland and Spain, but within the equilibrium range for Italy and Portugal.

The Phillips Curve for euro-area economies has flattened substantially, which could make rebalancing more difficult, as countries require much higher unemployment (or output gaps) to achieve the same price adjustments. As wages are less reactive than before, peripheral countries need persistently high levels of unemployment to achieve rebalancing through wages.

 

 

 

In our view, there is little room to keep pushing through that route in countries with overleveraged households.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/qY0wxb1_Dcw/story01.htm Tyler Durden