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Weekly Bull/Bear Recap: May 16-20, 2011

Tyler Durden's picture




 

Submitted by Rational Capitalist Speculator

Bull

+ For all the talk about how narrowing profit margins will put a crip
on hiring, Gallup Poll’s Job Creation sub-index keeps showing
strengthening hiring trends.  It has been near the top end of its range
since mid-May.  Meanwhile, as expected, jobless claims plunge
again from from 424,000 to 409,000.  The recent spike was nothing more
than a seasonal quirk.  Job growth (in addition to falling gas prices)
will serve to buttress consumer spending.

+ Fears of oil refineries being shut down due to the massive flooding along the Mississippi River are dissipating and gasoline futures have plunged roughly 15% since the early May peak.  This is setting the stage for falling gas prices which in turn will lead to an acceleration in consumer spending in the months ahead.  

+  It’s not like elevated gas prices have been significantly affecting the consumer anyways.  American’s have gotten used to higher prices as they only make up 5-6% of the consumption pie.

+ The bond market is doing its part in helping housing with mortgage rates dropping for the 5th straight week
to their lowest level this year.  This is happening right in the middle
of spring buying, which should help stabilize the housing market and
improve consumer confidence.  Meanwhile these lower rates have also set off a wave of refinancing, which will free up more disposable income for households.

+ The Wall of Worry remains high
Given how individual investors are always the last to the party, it’s
bullish when they bailout at the slightest drop in the S&P 500. 
There’s buying power on the sidelines and once the consumer seeings
falling gas prices, consumption growth will take a leg up and investors
will buy once again.   

+ Home Depot raised its outlook for the year
as same-store sales returned to positive territory after falling in
prior months due to bad weather.  Having a market-leader in home
improvement announce a raised outlook is a harbinger of improving investment growth in housing.  (Don’t own nor am I shorting Home Depot)

+ The Linkedin IPO
is a great success with the stock surging more than 110% after its
debut on Thursday.  Investor appetite for risk remains strong and
signals improving confidence in the recovery.  Market conditions, such
as falling rates, oil prices, increased lending, and rising stock prices
will make it easier for the recovery to progress. (Don’t own nor am I
shorting Linkedin)

+ Bank lending is the life blood of the economy.  So when you see reports of increased lending to businesses,
it signals that confidence is increasing on the part of banks and small
businesses as they believe business conditions have improved enough to
take risks.  The animal spirits are coming back and is a welcomed
development for the recovery. 

Bear

- Here are some more leading indicators for the Bulls.  The Conference Board Leading Indicator fell in April for the first time in almost a year
Worse, 2 of the 4 sub-indicators that came in positive were the
“interest-rate spread” (which is obviously manipulated by Bernanke’s
ZIRP policy) and “stock prices” (POMO anyone?).  Meanwhile, the ECRI
just delivered the bear clarion call: “Global-Slowdown is coming”.  

- The housing market continues to defy the optimists.  Numbers for April showed no sign of increasing construction activity anytime soon
as Housing Starts and Permits (which is a leading indicator) both
showed declines of 10.6% and 4.0% respectably.  Meanwhile, in a sign of
how non-existent demand is for housing, despite the lowest mortgage
rates of the year, existing home-sales still managed to drop in April (when they should be rising due to home buying season).  If I was a home builder, I’d be depressed as well.

- The Japanese earthquake and subsequent nuclear disaster (which just because the news isn’t on bubblevision anymore doesn’t mean it’s gotten any better), is beginning to show up in US economic data.  Industrial production for April came in flat surprising economists expectations for a slight gain.  February and March data were also revised lower.

- In news not having to do with the earthquake, the Empire Manufacturing Report was quite disappointing
for the bulls, coming in miles below the consensus estimate of 19.6, at
11.9 and down from 21.7 in April.  Prices paid rose 12 pts to the
highest since July 2008.  Meanwhile, the Philly Fed manufacturing index
for May showed that factories in the mid-west grew at the slowest pace in 8 months.  Contrary to economist’s expectation for the gauge to rise to 20.1, it came in at 3.9.  Yep I’d say that was a miss. 

- As if the Eurozone needed another dumb decision by a politician
In one of the weirdest financial stories of the year, IMF chief
Dominique Strauss-Kahn was just sick of dealing with the Eurozone issues
and let out his frustrations on a poor 32-year-old maid (nodding head).    

- Don’t you think it’s odd when you have analysts, money managers,
and bubble vision all chanting about how we are in the midst of a
recovery and that conditions are setting up for a major rally to end the
year while you have insiders dumping their stock to the tune of 350x sellers to buyers?  Putting my common sense cap on, something just doesn’t make sense here!   

- The Middle East is still a hotbed of Cold Wars, rising tensions, and sectarian violence.  Obama just upped the ante on the Syrian president, while laying down a controversial plan
for Israel to return to pre-1967 (ex. Gaza and West Bank) borders in
its peace process with the Palestinian state.  Israel has bluntly
rejected the proposal.

- The Eurozone made headlines late this week with S&P downgrading Greece sovereign debt due to a possible “soft-restructuring”, tensions are erupting between Eurozone officials (the wind speed on the house of cards is increasing).  Meanwhile, it’s not only the Finnish or Greek populace getting sick of the austerity (in order to bailout investors), Spain is now in the spotlight
as Zapatero’s “Socialist” party is set to suffer major losses in the
days ahead. Spanish 10-yr yields are at the top of their multi-month
range.  Things may be taking a turn for the worse.   

 

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Sat, 05/21/2011 - 09:56 | 1298009 faithfulwatchman
faithfulwatchman's picture

Even arsenic tastes sweet when ingesting.

Sat, 05/21/2011 - 10:30 | 1298059 Mec-sick-o
Mec-sick-o's picture

Try aspartame, it's taste will kill you, literally.

Sat, 05/21/2011 - 10:08 | 1298032 Catullus
Catullus's picture

I think it's time to seriously discount housing as a future indicator of household spending and wealth. People are no longer using their homes as ATMs and the HELCO game has come and gone. That may be devastating to some people and their ability to access credit may be forever impaired, but those are the breaks.

Sat, 05/21/2011 - 10:18 | 1298044 monkeys.pick.bottoms
monkeys.pick.bottoms's picture

What will be gold:oil ratio when oil shoots to $200?

Sat, 05/21/2011 - 10:26 | 1298054 Mec-sick-o
Mec-sick-o's picture

Currently we depend more on oil than gold.

I guess the ratio will be benefiting the oil, but can't predict how much.

Sat, 05/21/2011 - 10:20 | 1298051 Mec-sick-o
Mec-sick-o's picture

Zapatero: a tus zapatos!

Sat, 05/21/2011 - 10:44 | 1298078 The Fonz
The Fonz's picture

I consitently try to read this recap every week and it gets tossed out with all the other propaganda as I fear I am not clever enough to sort the lies from truth.  If somone who understands a complex topic better than I do presents something in a deceptive fashion I will disregard everything they say and seek another source of info. This style of recap is difficult for me to sort out because I sence both sides of the article are disinginune and biased in deceptive ways, that I cannot see clearly for myself besides sensing something is not quite right. 

I think the author is trying to express the biased view from both sides, however this biased veiwpoint in either direction does not provide me, a less sophisticated reader with anything but an instinct to seek a more honest discourse from both sides. I suggest that many readers may be here in part for an education. I do not fear complexity or reading what I do not understand. I do however fear misrepresentation of complexity while I am trying to learn to comprehend it.  There are so many lies in our society that often I have to toss the baby out with the bathwater when I sence deception.

This bull bear recap is something I very much desire from this site. However in this style  I must protect my budding comprehension of complex financial matters with intellectual honesty if I am to have any chance of seeing through the barrage of lies that are comsuming my future.

Thank you for writing this, and all that Zero Hedge has done towards my education.

Sat, 05/21/2011 - 11:58 | 1298180 slewie the pi-rat
slewie the pi-rat's picture

doug noland in yest's "credit bubble bulletin" [PrudentBear], points out what the banksters have been up to, w/ their multi-national friends (Paste):

May 20 – Bloomberg (Tim Catts):  “Google… Johnson & Johnson sold corporate bonds as issuance soared to at least $53.7 billion in the busiest week on record.”

Investment-grade issuers included Johnson & Johnson $3.5bn, Texas Instruments $3.5bn, Google $3.0bn, International Lease Finance $2.25bn, Blackrock $1.5bn, US Bancorp $1.0bn, Burlington Northern $750 million, Caterpillar $750 million, Liberty Mutual $600 million, Energizer $600 million, CSX $900 million, Alabama Power $500 million, Walt Disney $500 million, Aetna $500 million, Cintas $500 million, Duke Energy $500 million, E-Trade $435 million, McDonalds $400 million, Norfolk Southern $400 million, Kellogg $400 million, Ryder System $350 million, South Carolina E&G $350 million, Great Plains Energy $350 million, DTE Energy $300 million, UDR $300 million, B-Corp $240 million and Public Service New Hampshire $120 million.(End Paste)

slewie thinks maybe we are seeing some of that bankster liquidity gettin spread around, here.  doug n. sez: An index of investment grade bond risk added about a basis point to 90 bps. and: Ten-year yields declined 3 bps to 3.15%.  Long bond yields dipped one basis point to 4.30%.  so, you can do the math on these corp. bond loans.

the manure is being spread, eh?  since the nightmare in japan, i have been noting what i call the backorder economy.  the just-in-time supply train got held up by the scientists: earthquake, tsunami, techno-fail.  so i clown about getting out there and financing those backorders!  hurry, and we'll get the paper into the securities piepline, ASAP! 

so, it's nice to see that people are paying attention.  lol.

some of this long green = mergers + buyouts.  M&A activity is upskie, but this "business cycle" so far has consisited of trying to get some fuking air into this damned tire which is on a freaking bent rim---and not getting it reflated, yet. 

the headwinds are severe.  econom is taking some body punches, and that head shot is still fuk_u'ing away, reminding us of how clueless and powerless we are in the presence of our own wastes, and just how toxic we really are! 

b/c inflation has entered the econom "food chain" along w/ the radiation, some of these corporate borrowers have also been somewhat impoverished by inflation, even tho these top dogs have pricing power, so some of these new green stamps (that aren't replacing maturing debt) will go to finance the increased costs of inputs.  if you don't have a printing press, inflation is a tax.  yup, you can pay the debts back with cheaper dollars, but you still must pay for the needs of today, first.  and if prices are going up faster than your bankroll, you may eventually need a loan, yourself. 

econom headwinds and inflation.  stay defensive.  keep tacking into the wind.  it's all you can do.  don't run aground b/c false accounting reports don't show those zombie shoals, now,  ok?

Sun, 05/22/2011 - 16:41 | 1300440 silberblick
silberblick's picture

 

 

Follow the link below to find out why the Hong Kong Mercantile Exchange must be seen and understood as an extension of the Chinese government and its long term goals, and consequently, why it will not help create an equitable or realistic price discovery mechanism for gold. Not for now anyway.

http://thesilvergoldhedge.blogspot.com/2011/05/why-hong-kong-exchange-will-disappoint.html

 

 

Sun, 05/22/2011 - 17:58 | 1300562 PulauHantu29
PulauHantu29's picture

Thanks for the weekly summary.

Do NOT follow this link or you will be banned from the site!