As the year is coming to a close let’s put numbers, markets and Dollar signs aside for a few days and share in the spirit of the season. Wishing you all a happy holiday season full of joy and peace.
May the year 2012 bring you good health, happiness and prosperity!
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Here is our latest issue of market insights. Enjoy!
In This Week's Issue
• Weekly Snapshot
• Weekly Barometers
• Weekly Chart
• Precious Metals, a quasi Religion?
Weekly Snapshot
• The Italian 2 year yield is down to 5.29% - the 10 year yield is at 6.59%.
• The Spanish 2 year yield is down to 3.46% - the 10 year yield is down to 5.31%.
• The Euro fell below 1.3000 vs US$ but recovered to close at 1.3045 on Friday
• U.S. initial jobless claims fall to 366,000, the smallest number since May ’08
• Euro area annual inflation was 3.0% in November unchanged compared with October
• U.S. CPI increased 3.4% over the last 12 months before seasonal adjustment
• U.S. current account deficit decreased to $110.3 billion or 2.9% of GDP Q3 of 2011
• U.S. industrial production decreased 0.2% in November versus +0.7% in October
• OPEC ministers likely to keep oil production steady at 30M barrels a day
• IFO cut forecast for Germany, projecting GDP of +3% in 2011 and only +0.4% in 2012
• U.S. retail sales were $399.3 bn, up 0.2% from October and up 6.7% from one year ago
Weekly Barometers
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Weekly Chart
2011 has been a bumpy year for stock investors. In the U.S. the punters will be happy if they can break even for the year. Yet, if you feel U.S. markets have been volatile, think again. Most emerging markets have had an even tougher year. Investors in China probably won’t be too happy with the Shanghai Stock Index currently down over 20% for the year. But that pales in comparison to the parabolic rise and fall of Chinese stocks since 2006. The rise and fall was so dramatic that you can actually fit the shape of an Eiffel tower into the chart (see below).
Given these wild price swings, we should feel relatively safer investing in U.S. stocks. The direct comparison of Chinese equities with the S&P 500 makes the impact of the credit crisis on our turf look like a lame duck event. So then, are we better off investing in U.S. markets? Since 2006 Chinese equities are still up about 80% while U.S. stocks barely broke even. You may have lost your sanity along the way but if you had the courage to hold on, 80% over a 5 year period isn’t all that shabby.
Precious Metals, a quasi religion?
Precious Metals have had a difficult few months. Gold is off 16% from its high, Silver almost 40% down from the record high established in May of this year. But things aren’t just difficult for Gold and Silver, Mark Dow predicts more head wind ahead for 2012. Please consider: Another Grim Year for 2012–Even For Commodities.
Good luck and good investing!
Disclaimer
Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration. Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.
Here is our latest issue of market insights. Enjoy!
In This Week's Issue
• Weekly Snapshot
• Weekly Barometers
• Weekly Chart
• Corzine: I don’t KNOW, KNOW, KNOW
• Recommended Read
Weekly Snapshot
• 23 EU nations agreed to tighten their fiscal coordination; UK stays out
• Moscow’s RTS index lost 8.8% after civil protests voice election concerns
• The ECB cut its key interest rate by a quarter percentage point to 1%
• Chinese inflation slowed more than expected to 4.2% in November from 5.5% in October
• Italian government announces a €30bn three year budget deficit reduction plan
• Brazil’s economy was flat in Q3 but grew 2.1% compared with last year
• U.S. consumer sentiment rose to its highest level in six months in early December
• U.S. trade deficit in October was $43.5 billion, down from $44.2 billion in September
• Australia's central bank decided to cut interest rate by 25 basis points to 4.25%
• S&P placed ratings of the entire Eurozone on "Creditwatch” with negative implications
Weekly Barometers
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Weekly Chart
While there are imminent signs of a global economic slow-down, there may yet be some bright spots on the horizon. U.S. equities have held up surprisingly well despite signs of trouble in Europe and in emerging markets. Please consider our weekly chart, courtesy of Political Calculations. Based on expected future dividends per share, the glass might just be more than half full in the coming year.
Corzine: I don’t KNOW, KNOW, KNOW
The collapse of MF Global may not mean much to the average investor. However, traders of financial futures and options considered this firm as one of the premier commodities and futures brokers not too long ago. Who is to blame for their collapse? No one it seems, certainly not the former CEO Jon Corzine who resigned just days after the firm declared bankruptcy. While the finger pointing is now in full swing, I wanted to bring up a “slight” accounting discrepancy which occurred earlier this summer. According to data from the CFTC, the Commodities Futures regulator, MF Global had Excess Net Capital of -$150M, i.e. a shortfall, in July of this year. They miraculously recovered in August but then no more reports were published since September and in October, the firm declared bankruptcy.
With an estimated $1.2bn in customer assets still missing, the clients of MF Global are obviously outraged. As the lawsuits against the firm and its regulators are starting to pile up, please consider this video of Jon Corzine’s testimony before a congressional committee. Enjoy!
Recommended Read
Here is a succinct summation of the devastating effects a Euro break-up might have. Please consider : The terrible consequences of a Eurozone collapse.
Good luck and good investing!
Disclaimer
Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration. Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.
Here is our latest issue of market insights. Enjoy!
In This Week's Issue
• Weekly Snapshot
• Weekly Barometers
• Weekly Chart
• Recommended Read
Weekly Snapshot
• Mario Monti accepts post as Italy's new prime minister
• Italy imposed a ban on naked short selling of all Italian securities
• US stocks end a turbulent week in positive territory
• US consumer sentiment has risen to 64.2, the highest level since June
• Italian prime minister Berlusconi resigns and Italian Senate passes budget
• Italy's bond yields dropped to 6.46% after hitting a 14-year high above 7%
• China's exports underperformed in October due to the weak global economy
• US Trade deficit in September was $43.1 billion, down from $44.9 billion in August
• China's inflation in October fell to an annualized +5.5% from +6.1% in September
• US 30-year fixed mortgage rates fell below 4% for just the second time in history
Weekly Barometers
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Weekly Chart
Do Central Bank interventions work? The short answer is yes, but very often they influence only the short-term direction in the currency markets. Last week, we looked at a picture-perfect central bank intervention. Markets reacted immediately shedding about 400 points off the value of the Yen against the US Dollar. Since then however, the Japanese Yen slowly gained strength again and has since retraced about 60% of its losses from the intervention. While we had a picture-perfect central bank intervention last week, technical traders would appreciate the picture perfect retracement this week. With almost spooky precision, the USD/JPY exchange rate retraced 61.8% from its recent up-move, a textbook-like Fibonacci retracement level. But just in case this technical support level does not hold, the Bank of Japan might find out, much to their chagrin, that market interventions don’t always produce the intended results.
Recommended Read
Since the events in Europe have had such a big impact on the financial markets worldwide, it is worth taking a closer look at the past, the present and the future prospects of the European Union. Please consider: Europe, the International System and a Generational Shift.
Good luck and good investing!
Disclaimer
Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration. Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.
Here is our latest issue of market insights. Enjoy!
In This Week's Issue
• Weekly Snapshot
• Weekly Barometers
• Weekly Chart
• Recommended Read: Bonds Beat Stocks
• A Picture Perfect Central Bank Intervention
Weekly Snapshot
• Greek Prime Minister George Papandreou survived a crucial vote of confidence
• US nonfarm payroll employment continued to trend up in October (+80,000)
• US unemployment rate was little changed at 9.0%
• The unemployment rate in the Euro zone was 10.2% in September, the highest since 1998
• Fed downgrades its growth forecasts; it expects GDP to rise by just 1.7% this year
• Chinese residential real-estate prices fell a monthly 0.23% in October
• MF Global filed for bankruptcy on Monday leaving about 150000 accounts in limbo
• US consumer confidence down 6.6 pts in October. It now stands at 39.8 (1985=100)
• Japan intervened against the rise of its currency, selling about ¥7 trillion ($89.7 bn)
• New ECB head Mario Draghi lowers interest rates a quarter-point to 1.25%
Weekly Barometers
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Weekly Chart
With all eyes on Europe again this week, investors could have easily overlooked the much more important economic data affecting the US economy, namely the employment report that came out Friday morning. The US economy only added 80,000 jobs – somewhat disappointing on first glance. However, employment numbers for August and September were significantly revised upwards leaving us with a specter of hope that October may have a similar upward revision going forward.
Although the unemployment rate remains stubbornly high, there are few encouraging signs. First, the trend is going in the right direction. Some might suggest that it takes another 4 years to get back to the employment level of 2007, but it looks like the worst is behind us and the longest employment recession since WWII is loosing steam. Job creation will clearly be an important component of the next presidential election and that should bring about additional jobs programs.
Although still unacceptably high, the number of long-term unemployed (six months or more) fell to 3.8% of the labor force. Given the right combination of jobs programs and real incentives to work + real disincentives not to work, that number could come down as fast as it went up. Let’s hope that our political leaders will hear this and get the incentives right.
Recommended Read: Bonds Beat Stocks
Please consider: Say What? In 30-Year Race, Bonds Beat Stocks. Cordell Eddings suggests that “the biggest bond gains in almost a decade have pushed returns on Treasuries above stocks over the past 30 years, the first time that’s happened since before the Civil War.” I haven’t had the chance to check the math on this yet but suppose it is correct, we might have to rewrite some of our finance text books.
A Picture Perfect Central Bank Intervention
Last week we hinted at a possible central bank intervention as the Japanese Yen approached yet another all-time record against the US Dollar. The Bank of Japan dutifully obliged and sold almost $90bn worth of Yen (¥7 trillion) to weaken their own currency and support the dollar. Here is a picture perfect chart of the impact of a central bank intervening in the currency markets. The short-term effect was swift and powerful (about 400 points in 3 hours), however, it remains to be seen how effective this intervention will be in the medium- to long-term.
Good luck and good investing!
Disclaimer
Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration. Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.
Here is our latest issue of market insights. Enjoy!
In This Week's Issue
• Weekly Snapshot
• Weekly Barometers
• Weekly Chart
• Recommended Read
• Recommended Video
• And The Winner is...
Weekly Snapshot
• US consumer spending rose in September while personal savings declined
• The Japanese Yen was at a new record of 75.65 versus the US Dollar
• China's manufacturing sector expanded moderately in October
• EU asks Greece's creditors to take losses of 50% on their holdings of Greek bonds
• US consumer sentiment improved in October for the second month in a row
• US real GDP grew at an annual rate of 2.5% in the third quarter of 2011
• US durable goods orders for September rose 2.4% excluding airplane orders
• US home prices were up 0.2% in August, the 5th straight monthly increase
• The Bank of Japan eased monetary policy by purchasing government bonds
• India raised interest rates to 8.5%, the 13th increase in the past 19 months
Weekly Barometers
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Weekly Chart-All Eyes on Europe
It was all about Europe again as the world awaited results from the European summit which focused on the Greek debt crisis. There was an “agreement” of some sort wherein creditors were asked to take a 50% haircut on their holdings of Greek government debt. Painful indeed for those who were daring enough to lend money to Greece but perhaps still better than the values implied by bond markets. While Greece may have some short-term relief now, the news does not bode well for long-term prospects. It will take a long time and far higher bond yields to attract additional financing which is clearly going to be needed next time the Greek cash runs out again. My guess is three months from now…
In terms of the impact on Europe and its flagship currency, a major crisis has been averted for now. With combined efforts, Frau Merkel and Monsieur Sarkozy have become very adapt at kicking the much bigger can a bit further down the road. The markets cheered and rallied across the board in an all encompassing sigh of relief. What about future prospects though? Will the focus of the markets now shift to the other European periphery countries, Portugal, Ireland perhaps even Spain and Italy?
Is the Euro going to be more stable now and will it survive yet another round of attacks?
Putting things somewhat into perspective, we should recall that the Euro was only at 1.2 versus the Dollar when the Greek crisis first unfolded about 18 months ago. Many analysts then wrote that the Euro was “toast.” Fast forward to today and the Euro is trading above 1.4, substantially higher and than 2 summers ago. With Greece at a technical default level, the Euro has indeed remained remarkably strong, at least in relative terms compared with the Dollar. While Europe awaits the next sovereign debt issue, possible candidates are Portugal and Ireland, here is a direct comparison with equities. From this perspective, the Euro has performed remarkably well, was ahead of the S&P 500 and also only about half as volatile so far this year. However, we can rest assured that there is more to unfold in this European saga.
Recommended Read
The financial services overhaul legislation is well under way by now. Still, most players in the financial services industry are spooked by uncertainty as to when and how the new rules will pan out and how they will affect us if and once they are actually implemented. Please consider Dodd Frank’s long-distance paper chase by Gillian Tett, questioning whether more rules will make our financial lives any safer.
Recommended Video
The Euro is not toast after all. In fact, it has shown much resilience so far. But despite this week’s positive market signals and an extension of a Greek default (although they are technically at default level), fundamentally nothing has changed. Greece still has a mountain of debt and the financial conditions of Portugal, Ireland and, to a lesser extent, Spain and Italy are essentially the same. This leads to the question as to the long-term viability of the Euro and its constituent countries. Please consider the following interview with Mark Dow who succinctly lays out the options for the Eurozone going forward.
And The Winner Is…
After a summer of political debate over the U.S. debt ceiling and while the European sovereign debt crisis has been brewing, quietly and almost surreptitiously, the Japanese Yen has continued to gain strength against the Dollar. This week, the U.S. Dollar fell to a new all-time low of 75.65 against the Yen. Perhaps more so a reflection of Dollar weakness rather than pure Yen strength, the strong currency however, is giving Japanese policy makers a big conundrum. Japan has again softened monetary policy hoping to lessen the value of the Yen going forward. Continued currency strength is a problem for an export-driven economy. So far the trend is clearly in favor of a stronger Yen. We are slowly approaching intervention territory. Let’s see how far the Bank of Japan will let the Yen rise before additional measures are taken.
Good luck and good investing!
Disclaimer
Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration. Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.
Here is our latest issue of market insights. Enjoy!
In This Week's Issue
• Weekly Snapshot
• Weekly Barometers
• Weekly Chart
• Recommended Read
• Recommended Audio
Weekly Snapshot
• Federal Reserve Vice Chairman Janet Yellen hints at possible QEIII
• European Union considers a 60% haircut for Greek government debt
• Germany slashes 2012 GDP growth forecast from 1.8% to 1% next year
• Fed's Beige Book shows slight economic improvement in September and early October
• Leading economic index for the U.S. increased 0.2% in September to 116.4
• U.S. consumer prices rose 0.3% in September; up 3.9% since last year
• U.S. producer prices jumped 0.8% in September, following no change in August
• CFTC gave its approval to restrictions on speculating in commodities
• Australia's central bank may cut interest rates as soon as November
• China's 3rd quarter GDP rose 9.1% (annualized) down from 9.5% in Q2
Weekly Barometers
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Weekly Chart
It’s the time of year when health insurance providers send out their customary letters to announce rate increases for the upcoming year. It was no surprise that I received one such letter announcing yet another roughly 10% rate increase for health insurance premiums. It has become painfully obvious that the amount of these rate increases cannot possibly continue given that wages have been stagnant for more than a decade. Using the handy Rule of 72, we can derive that a 10% rate increase will double insurance premiums every seven years. If that trend were to continue, health insurance rather than housing would be the major component of an average family’s cost of living. And yet, deflation has been the voiced concern of public officials who continue to focus on housing. First in line, a slim but rather vocal majority of central bankers who see salvation in propping up asset prices. Cheap money has not been able to improve housing prices but it has had its effect on a number of asset classes. While the debate over inflation versus deflation continues, official inflation figures are now slowly falling in line with a sort of “felt-inflation” the average consumers experience in their daily lives.
Forget official CPI figures for a moment and recall that the basket of goods which makes up the components for the consumer price index has been adjusted a number of times, most significantly in the mid ‘90s. This was done to simply minimize the cost of living adjustment for wages and social security as some critics suggest. Please consider our weekly chart below, courtesy of www.dshort.com and www.shadowstats.com who contend that actual inflation is substantially higher than currently reported via the CPI. An inflation rate of 11.45% sounds alarming but it certainly feels closer to the financial pinch consumers have been experiencing and it is very much in line with those dreaded rate increases of health insurance premiums.
Recommended Read (with visuals)
The PEW Charitable Trust recently published a report with lots of visuals explaining how the choices made over the last 10 years contributed to our nation’s debt. Please consider: Ten Charts Essential to Understanding the Federal Debt.
Recommended Audio
After numerous delays, intense lobbying and ongoing battles fought through lawyers and accountants representing various interest groups, a recently issued first draft of the Volcker Rule has been summarized by the FDIC & SEC and is now awaiting comments and more legal battles before actual rules can be implemented. This draft of the Volcker Rule a.k.a. “PROHIBITIONS AND RESTRICTIONS ON PROPRIETARY TRADING AND CERTAIN INTERESTS IN, AND RELATIONSHIPS WITH, HEDGE FUNDS AND PRIVATE EQUITY FUNDS” is available here.
Perhaps some of our readers feel compelled to read the 298 pages of beautifully drafted legalese and if so, might we receive some comments on the proposed rules? For those of us who are otherwise occupied, there is a convenient audio summary courtesy of Market Place. Please consider: The Problems With The Volcker Rule.
Good luck and good investing!
Disclaimer
Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration. Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.
Here is our latest issue of market insights. Enjoy!
In This Week's Issue
• Weekly Snapshot
• Weekly Barometers
• Weekly Chart
• Recommended Read
• Recommended Video
Weekly Snapshot
• Industrial production for August was up by 1.2% in the Euro area
• Euro area annual inflation was 3.0% in September 20112, up from 2.5% in August
• U.S. retail sales in September were up 1.1% from August and up 7.9% from a year ago
• U.S. senate approved a bill aimed at forcing China to raise its currency against the Dollar
• China's trade surplus fell to US$14.5 billion in September from $17.8 billion in August
• China's September CPI fell to an annualized +6.1% from +6.2% in August
• Australia's jobless rate declines for tirst time since March
• U.S. Consumer Sentiment Index unexpectedly drops to 57.5 In October
• The number of unemployed in Britain rose to a 17-year high of 2.57m
• Federal regulators unveiled a 298-page draft the new "Volcker Rule"
• The August 2011 U.S. trade deficit was virtually unchanged at $45.6 billion
• The U.S. government ran a $1.3 trillion deficit for the budget year 2011
Weekly Barometers
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Weekly Chart
Christopher Sims (Princeton) and Thomas Sargent (NYU) won the Noble prize in Economics for developing tools to analyze the economic causes and effects of monetary policy – Congratulations!
Although everyone seems to agree that the state of the US educational system is in need of a major overhaul, the U.S. continues to produce Nobel laureates like no other country. It appears that the number of Nobel laureates is a reflection of America's ingenuity, creativity and innovation is a source that its entrepreneurs continue to rely upon. Perhaps herein lies the path towards finding solutions to the economic challenges and a path towards greater prosperity.
Recommended Read
Here's a an attempt towards finding positives within an economy that looks more and more like a recession. Please consider Why The Economy Looks Like Expansion, Feels Like Recession by Daniel Gross.
Recommended Video
The markets have been in a tight trading range all summer. Are there any signs of a change in this side-ways trend? Time for Macke's purple crayon again to get a sense of how to position your trades.
Good luck and good investing!
Disclaimer
Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration. Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.
Here is our latest issue of market insights. Enjoy!
In This Week's Issue
• Weekly Snapshot
• Weekly Barometers
• Weekly Chart-Déjà Vu
• Recommended Video
Weekly Snapshot
• Apple co-founder Steve Jobs died at the age of 56 following a long battle with cancer
• ISM Manufacturing index was up 1% from August and better than expected
• U.S. Stocks finished lower on Friday but were up 2% for the week
• U.S. Nonfarm payroll employment edged up by 103,000 in September 2011
• U.S. unemployment rate held at 9.1% or 14.0 million unemployed persons
• The Federal Reserve's balance sheet was $2.843 trillion on Oct. 5
• The Bank of England kept rates at 0.5%, plans an additional £75bn in quantitative easing
• The European Central Bank held interest rates steady at 1.5% in October
• Global uncertainty led the Reserve Bank of Australia to keep the cash rate on hold at 4.75%
• The Fitch agency downgraded its sovereign credit rating for Italy and Spain on Friday
• Rates on 30-year fixed mortgages fell to 3.94% this week, the lowest rate ever
Weekly Barometers
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Weekly Chart-Déjà Vu
Do you believe in coincidence or are you in the camp of believers in a higher order of all things perhaps unbeknownst to us? Chartists and technical traders were spooked by a rather strange form of déjà vu this week. Not directly apparent in the chart below is a very peculiar reoccurring closing price last seen in the midst of the financial crisis in 2008.
The S&P 500 closed at 1099.23 on Monday October 3 of this week…
…the exact same level it closed on October 3 2008.
Whether it is sheer coincidence or the result of a planned effort, it sure looked spooky. Conspiracy theorists out there, do you have any insights?
Farewell To Steve Jobs
We would like to add our sentiments to Steve Jobs who passed away this week. Appreciation for his work and his legacy cannot truly be expressed in words so here’s an attempt to visually represent some of his achievements. This chart is from a previous blog post earlier this summer.
(Click on chart to see larger image)
Steve Jobs was also known for creating a Reality Distortion Field (RDF) which as alleged to influence audience and coworkers to believe almost anything was possible. We may or may not believe in RDF. Apple’s stockholders however, were engulfed in RDF long enough to make it the most valuable company in the world at its peak. After his return to Apple in 1996, its market value grew from $1.7 billion in 1997 to $350 billion. Apple’s stock had an equally remarkable performance catapulting its share price from about $16 to over $420. Whatever happens to Apple now, his genius will truly be missed. Farewell Steve!
Recommended Video
In honor of Steve Jobs, we decided to reference a rare video interview with Steve Jobs and Bill Gates. Enjoy!
Good luck and good investing!
Disclaimer
Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration. Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.
Here is our latest issue of market insights. Enjoy!
In This Week's Issue
• Weekly Snapshot
• Weekly Barometers
• Weekly Chart
• Recommended Read
Weekly Snapshot
• U.S. Stocks end gloomy 3rd quarter on a weak note, down 7.18% in Q3
• Freddie Mac reported 30-year fixed mortgage rates at record low 4.01%
• Euro area annual inflation is expected to be 3.0% in September 2011
• The Euro area unemployment rate was 10.0% in August 2011, unchanged from July
• China's manufacturing improved slightly in September, for a second month of gains
• Bank of America will charge a new $5 monthly fee for the use of a debit card
• The German parliament approved increasing the size and flexibility of the ESFS
• U.S. real GDP increased at an annual rate of 1.3% in the second quarter of 2011
• Durable goods in August decreased $0.2 billion or 0.1 percent to $201.8 billion,
• U.S. Consumer Confidence Index at 45.4 (1985=100), up slightly from 45.2 in August
• U.S. home prices rose for a fourth consecutive month, up 0.9% in July over June
• U.S. new home sales in August down 2.3% from July, but up 6.1% from a year ago
• CME Group hiked margins again, on gold by 21%, silver by 16% and copper by 18%
Weekly Barometers
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Weekly Chart
It’s the end of the quarter and the end of a rather tumultuous summer for investors. September is usually the weakest month of the year, but this one was particularly unappealing at -7.18% for the month. Adding the –5.68% in August and –2.15% in July, the S&P 500 really took a chunk out of investors’ pockets. The S&P 500 has been settling in clear bear market territory again but the index is still 67.2% above the March 2009 low.
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Not all that encouraging one could argue. Then again, other markets felt the pinch as well. In fact, the U.S. markets fared reasonably well compared with other markets in Europe and Asia. Might the U.S. be in a relatively better position after all?
Recommended Read
Please consider The Price of Gold in the Year 2160. This article puts a lighter twist on the gold mania that captured investors’ nerves recently. Enjoy!
Good luck and good investing!
Disclaimer
Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration. Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.
Here is our latest issue of market insights. We decided to give our readers a bit of a (reading) break this week by focusing on the positives among the plethora of bad news emanating from the markets. While viewing the economic glass as half full, it still pays to be vigilant. Be careful out there!
In This Week's Issue
• Weekly Positives
• Weekly Barometers
• Weekly Chart
Weekly Positives
• Federal Reserve does operation twist- US Treasuries rally to new record highs.
• Bankrate.com reports that the average 30 yr mortgage rate falls to 4.0%
• U.S. building permits in August 2011 up 3.2% from July and up 7.8 % from August 2010
• U.S. Existing Home Sales at 5.03mm annualized were 280k more than expected
• U.S. Leading Economic index increased 0.3% in August to 116.2 (2004 = 100)
• Crude oil futures fell below $80 prompting lower gas prices at the pump
• European reality check: Greek economy is only about 2% of Europe's GDP
• Despite a near certainty of a Greek default, the Euro is still trading around $1.3500
• Sharply lower commodity prices easing pressure on inflation and cost of living
Weekly Barometers
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Weekly Chart
Gold prices Gold crashed more than $100 on Friday but the elephant in the room in terms of market volatility was clearly silver. U.S. silver futures dropped 18% on Friday, the biggest daily loss since 1987. However, there was a bit of a “silver” lining amidst these massive falls in commodity prices. The supporters of doom and gloom scenarios who bought gold, and to a lesser and much later extent also silver, were proven wrong at least for the week. Perhaps the fall in precious metals will now prompt a move towards a re-allocation into equities after the dust settles. Nevertheless, it still pays to keep your financial seat-belt fastened. Be careful out there and tread lightly in these murky waters!
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Source: Stockcharts.com |
Good luck and good investing!
Disclaimer
Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration. Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.
Here is our latest issue of market insights. Enjoy!
In This Week's Issue
• Weekly Snapshot
• Weekly Barometers
• Weekly Chart
• Recommended Read
• Recommended Video
Weekly Snapshot
• A "rogue trader" in London racked up about $2 billion in trading losses for UBS (WSJ)
• The ECB is expected to pause monetary policy tightening until Q2 of 2012 (Economist)
• The Euro area annual inflation during August was stable at 2.5% (Eurostat)
• World's leading central banks to provide unlimited dollar funding to EU's banks (WSJ)
• Foreign investment into China remained strong in August, up 11.1% y/y (Economist)
• U.S. consumer sentiment index inched up to 57.8 in September from 55.7 in August (AP)
• U.S. current-account deficit decreased to $118bn or 3.1% of GDP in Q2 of 2011 (ESA)
• U.S. consumer price index for all urban consumers increased 0.4% in August (BLS)
• U.S. industrial production increased 0.2% in August versus 0.9% in July (Federal Reserve)
• U.S. retail sales in August unchanged from July and up 7.2% from one year ago (BLS)
• The Producer Price Index for finished goods was unchanged in August (BLS)
• China imports surged 30.2% in August from a year ago, following a 22.9% rise in July (WSJ)
Weekly Barometers
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Weekly Chart
This week marked the third anniversary of Lehman Brothers' bankruptcy filing. It was one of the largest implosions of financial institutions and became a catalyst for the 2008 financial crisis. Steven Davidoff of NY Times Dealbook gives us a brief history lesson in a tale of two deals: the acquisition of Merril Lynch by BofA and the purchase of Lehman’s investment banking and capital markets operations by Barclays.
Which was the better deal? The chart below suggests that shareholder value for Lehman was completely lost. However, as Steven Davidoff suggests, “by buying Lehman out of bankruptcy, Barclays did not take on Lehman’s toxic assets. These consisted of more than $600 billion in debt. Barclays avoided liability for most of it.”
Too bad we can’t make those kinds of deals…
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Source: Yahoo! Finance |
Recommended Read
Please consider This $2bn mess has uncanny historical echoes, a succinct assessment of another rogue trading scandal. Despite supposedly tighter controls and vastly improved risk management models, UBS was yet another bank that has failed miserably in preventing an alleged rogue trader from potentially bringing down the Swiss bank. As Gillian Tett concludes, would someone please translate “déjà vu” into Swiss German?
Recommended Video
Please consider U.S. Treasury Secretary Tim Geithner’s interview with Jim Cramer. Lots of interesting suggestions by a competently speaking Mr. Geithner. However, as he points out the elephant in the room i.e. the political dysfunction of governments, we must wonder how more government and more Dollars in the hands of dysfunctional governments can do the trick.
Good luck and good investing!
Disclaimer
Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration. Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.
Here is our latest issue of market insights. Enjoy!
In This Week's Issue
• Weekly Snapshot
• Weekly Barometers
• Weekly Chart
• Recommended Read
• Yet More Signs Of The New Normal
Weekly Snapshot
• U.S. 10-year T-note yields decreased to an all-time low of 1.9% on Friday (AP)
• Chinese inflation fell in August to an annualized +6.2% from +6.5% in July (Bloomberg)
• U.S. President Obama proposes a $447 billion Jobs Stimulus Plan (Bloombgerg)
• European Central Bank cut its economic growth forecast and left rates unchanged (AP)
• The Bank of England has left its benchmark interest rate at 0.5% (Bloomberg)
• U.S. 30-year fixed-rate mortgages fell to 4.12%, the lowest in over 50 years (WSJ)
• Chinese officials said the Yuan will achieve “full convertibility” by 2015 (Bloomberg)
• The U.S. international trade deficit for July decreased 13.1%, to $44.8bn (ESA)
• The Bank of Japan has kept its key interest rate at zero to 0.1%, as expected (Reuters)
• The Swiss National Bank set a minimum exchange rate target of 1.20 Francs per Euro (Reuters)
Weekly Barometers
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Weekly Chart
In these uncertain times when the markets are going haywire, investors have an even higher desire to find answers to the multi-million dollar question: “What drives the markets and where will prices be tomorrow?” Responses from all sorts of forecasters are abundant but somehow the market observer trying to find reasonably sensible answers often gets disappointed. Personally, I find a solace in simplicity: If there are more sellers than buyers, prices will go down.
One way to cope with uncertainty is to use humor and the inquisitive Felix Salmon found just that in the following blog post: JP Morgan explains the euro crisis with lego. Please refer to the index below to fully appreciate this graphic.
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1. The toreador in a floppy hat, and the F1 driver with his helmet, represent Spain, Italy and the rest of the Euro Periphery. |
Recommended Read
Stephen King, the chief economist of HSBC came up with a compelling rationale for the current dilemma facing financial markets. The answer is worthy of his namesake, the author best known for his work in the horror and suspense genre. Please consider: I can’t hear the markets but I can smell fear.
Yet More Signs Of The New Normal
Last week, we examined a number of charts indicating a gradual trend to the now famous phrase: “The New Normal”. Here are a few more milestones on the path to the new normal…
Increasing government efforts towards managing exchange rates: The Swiss National Bank could no longer tolerate the rapid appreciation of the Swiss Franc against the Euro (and the Dollar). In a statement, the central bank said it will enforce a new target rate of 1.2 Swiss Francs per Euro “with the utmost determination and is prepared to buy foreign currency in unlimited quantities." The market reaction was immediate and vehement. One of the biggest currency interventions in recent history. The US Dollar gained about 10% against the Swiss Franc on the news.
China finally gives an indication of a time frame: During a talk with European business executives, Chinese officials suggested that the Yuan will be fully convertible by 2015. This is perhaps the strongest indication of a target year in which China may actually come onto the world stage of capital markets. Everyone seems to agree that the Chinese Yuan is still vastly undervalued. It is expected that China will gradually manage its currency to slowly get back to the level prior to the massive exchange rate adjustment of the mid 90’s. While everyone seems to agree that the Chinese Yuan will continue to appreciate versus the US Dollar, the contrarian in me says we should at least consider the possibility that a freely convertible currency might cause substantial capital flight potentially causing a weakening of the Yuan. Might 2015 be the year to buy Dollars again?
Japan all over again: The yield on the 10-year Treasury Bill fell to a new record low of 1.9% on Friday. This is clearly the result of a growing sense of uncertainty among investors. The same type of risk-off reaction continues to weigh on equity prices bringing some painful memories to those who had invested in Japanese stocks towards the end of the 1980’s when the Japanese stock index peaked. Japanese stocks never recovered despite massive government stimuli and essentially 2 decades of near zero rates. The Nikkei Index today is barely at a quarter of its value of the peak. US markets by contrast are only at the first “lost decade” in terms of equity returns but the same Japanese-style policy is being employed to combat deflationary pressures, so far with only mixed results. Perhaps policy makers should examine the historic chart of the Japanese Stock Index.
Risk-Free rates no more: While the major developing nations are still able to finance budget deficits by incurring yet more debt at ultra(lower) rates, developments in Europe are showing the effects of investor sentiment who have lost the least bit of hope that Greece can come out of their quagmire without a default. The yield on 1-year Greek government bonds rose to a stratospheric 97.96%. As investors of Greek government paper have come to realize, it is their risk-free rate no more.
Good luck and good investing!
Disclaimer
Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration. Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.