Archive - May 1, 2015

So if you were sitting then in the turmoil of the economic upheaval and had to get on the phone to the one person that was likely to get you through the mortgage rates hikes and the jobless rates or the spiraling debt and inflationary pressure, then who would you immediately think of?

We know it's a little early for humor... but seriously, meet Beijing Baofeng Technology...

"It seems logical to assume that absent a major international economic accident, the current Fed is bound and determined to continue stimulating asset prices until we once again have a fully-fledged bubble," GMO's Jeremy Grantham says, reiterating his stance that S&P 2250 marks the point where investors should start to get worried.

While it is entirely likely that "economic bulls" will get a bounce in Q2 and Q3 due to pent-up demand from the previous two-quarters, the strength and sustainability of that bounce will be critically important. After all, in just a few short months, the cold breath of winter will once again be upon us.

"We remain constructive on the US for three reasons: 1) economic data should improve in the next few quarters; 2) the Fed does not seem to be in any rush to move early and a June rate hike seems unlikely; and 3) while investors are focused solely on the first rate raise, we think the overall path higher will be gradual, in contrast to previous rate shifts. These factors should create an environment where growth improves and monetary policy stays flexible, which is generally good for equities (higher multiples notwithstanding). We may follow last year’s playbook and ignore the old adage to “sell in May and go away.”

Investors are clearly in a bit of a no-man’s land of market narrative, with the dollar weakening and U.S. corporate earnings slipping.  Market participants, like all pack animals, appreciate clear direction and leadership – and we don’t have much of either right now. When considering how they will react, we can compare the two competing frameworks for understanding market behavior: the "Random Walk hypothesis" and the "House money effect." The first states that markets move in random patterns, with prior activity having no bearing on future price action. The latter shows that individuals do actually consider prior gains and losses when making economic decisions. Let’s just hope investors hold to their belief that it’s the house’s money at work here, and that they don’t walk randomly out of the market.

April's Manufacturing PMI printed a minimally disappointing 54.1 (against 54.2 prior and expectations) - its lowest since January and hardly the post-weather Q2 surge everyone was hoping for. New Orders and Production were the weakest since December and export business fell for the first time in 5 months and input prices dropped for the 4th month in a row; all leading Markit to demand The Fed remain patient. ISM Manufacturing missed expectations and has not risen for 5 months (its longest streak since the recession) with a contraction in the employment index to lowest since Sept 2009. And then Construction Spending plunged 0.6% (against a +0.5% exp.) - the 7th miss in 10 months and worst April print since 2009.

Once again proving, "you get what you pay for," world-renowned Dennis Gartman unleashes his own brand of indecipherable nonsense advice to stock traders this morning...

Lowes' stock is down 2.5% in the pre-open (after notable weakness yesterday) despite the broad market's bounce, following reports that the home improvment retailer sold the same 'toxic' flooring as Lumber Liquidators:

*LUMBER LIQUIDATORS SHORT SELLER SAYS LOWE’S SOLD TOXIC FLOORING
*ZHOU SAYS LOWE'S SOLD SIMILAR QUESTIONABLE FLOORING FROM CHINA

Zhou intends to present the report proving this later today and for now Lowes has said its flooring is safe and compliant with regulations.

In reviewing the financials of one of the largest shale producers in the United States, Whiting Petroleum, we can’t help but notice the parallels to the .COM era of 1999 which, to some extent, has already returned to the technology and biotech sectors of today.

It's 830ET, do you know where your ubiquitous precious metal seller-in-size is? At 834ET, someone "special" decided it was the perfect time to sell $590 million worth of gold futures...

Earlier this week, Greek pensioners discovered that a "technical glitch" caused the delay of some €2 hundred million in pension payments. Apparently, Athens ran out of money. Exhausted, exasperated, and short on cash, restless retirees have now taken to storming pension fund meetings and forming lines at banks.

JP Morgan’s massive silver buying brings to mind the Hunt Brothers' attempt to corner the silver market in the late 1970s. The Texas oil-tycoons tried to corner the silver market by accumulating a massive silver futures position.  Ted Butler has estimated that JP Morgan may currently hold far more than their official figure of 55 million ounces.

The past few years have been a period of relative stability for the U.S. economy.  A lot of people have been lulled into a false sense of security during that time.  These people have become convinced that our problems have been fixed.  But they haven’t been fixed at all.  In fact, our problems are far, far worse than they were just prior to the last financial crisis. Don’t let this next recession take you by surprise.