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Weekly Bull/Bear Recap: Feb. 4-8, 2013

Tyler Durden's picture




 

From Rodrigo Serrano of Rational Capitalist Speculator,

This objective report concisely summarizes important macro events over the past week.  It is not geared to push an agenda.  Impartiality is necessary to avoid costly psychological traps, which all investors are prone to, such as confirmation, conservatism, and endowment biases.

 

Bull:

+ The service sector, which accounts for almost 80% of the U.S. economy, remains in growth mode.  The Institute of Supply Management’s Non-Manufacturing survey reports a healthy 55.2 composite reading and an extremely bullish Employment subindicator of 57.5, its strongest reading since February 2006.  Furthermore, Export New Orders crossed into expansion territory and imply improving global trade conditions.  Indeed, today’s U.S. International Trade report “suggests exports — a key engine of the U.S. recovery — are finding their footing after stalling last year…

+ The global expansion thesis is further boosted by Singaporean manufacturing ending its spell of contraction, German Factory Orders showing signs of bottoming (mirroring improvement in recent Ifo surveys), and Japanese Machinery Orders increasing for the 3rd consecutive month

+ The bears have severely erred on their assumption that China wouldn’t be able to execute a soft landing.  In addition to improving manufacturing surveys, HSBC’s Services PMI survey is now solidly in expansion territory, notching a reading of 54 from 51.7 in December.  China is in position to lead the global recovery again.

+ The U.S. consumer remains quite resilient.  Chain Store sales surge the most since September 2011 and are much better than expected, while Gallup’s Consumer Spending report shows a 4-week average YoY gain of almost 30%.

+ Fed officials are optimistic that a positive wealth effect has taken hold and Q4 GDP numbers reflect only a transitory blip (due to weather-related events) towards continued recovery (Q4 GDP will be positive when the second revision is published).  Rising home values as well as gains in U.S. stock markets have improved consumer psychology.  Furthermore, investors can take solace that the FOMC won’t be backtracking on its promise to continue providing monetary stimulus even in the face of improving economic conditions.

+  The U.K. has seen a string of improving economic numbers this week: the Services Purchasing Manager’s Index swings into expansion in January; Same Store Sales improve 1.9% as well; and Industrial Production for December prints better than expected.  In addition, investors are nodding at recent economic improvement in Europe.      

Bear:

The European political and economic storm looks to pick up strength in the months ahead: 

Inter-market trends are deteriorating.  A look at the XLF/XLU ratio indicates that deflation fears may resurface soon and would be a negative for equity markets and bullish for Treasury bonds.  In fact, 10-yr Treasury yields are showing a negative divergence vs. equity markets and is a red flag.  Furthermore, equity markets are at long-term resistance, all the while investor sentiment is very bullish.  The stage is set for a correction over the coming weeks. 

- U.S. Weekly sales metrics (Goldman ICSC and Redbook) show continued weakening consumption trends.  Tepid growth readings over the course of January, in addition to a third consecutive weak reading from Discover’s U.S. Spending Monitor, are a shot across the bow for a subpar January Retail Sales report, due on Feb. 13.  Perhaps this is because job creation has stalled according to Gallup’s Job Creation indicator, which just slumped to an 11-month low.  Or perhaps it’s because the nation’s average gas price has risen 17 cents from a week ago.  

- Q4’s Productivity and Unit Labor Cost report portends deteriorating earnings trends for corporations.  Productivity (output per worker) declined  2.0% and was more than expected; meanwhile, unit labor costs surged 4.5% vs. market expectations of a 3.1% increase.  Real wages, vs. nominal, continue to shrink.  ”Hourly pay for American workers fell for the second straight year after factoring out inflation, marking the worst two-year stretch in the U.S. since World War Two.”  

- Does Canada have a popping housing bubble?  Canadian building permits in December plunged 11.2%, after a 17.9% drubbing the month before.  Meanwhile housing starts crater 18.5%.  

 

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Fri, 02/08/2013 - 21:24 | 3227835 nmewn
nmewn's picture

And if you don't take on risk as we say and the inherent multiple levels of taxation for your profits you lose, got it.

I'll stick with my precious ;-)

Fri, 02/08/2013 - 22:48 | 3228035 Stoploss
Stoploss's picture

Somebody bought a whole lotta XLF puts today.

Sat, 02/09/2013 - 09:34 | 3228491 kliguy38
kliguy38's picture

Its funny to think just how simple and obvious the physical play is, yet they have confounded and obfuscated it to the point that only the well healed and the ZH'r types are in it. The clever MSM manipulation creating a dangerous aura around PMs verges on the ridiculous......enjoy the game....

Fri, 02/08/2013 - 22:21 | 3227976 disabledvet
disabledvet's picture

Canada is in DEEP doo doo. Venezuela blowing up is a direct shot over THEIR bow (as Venezuela used to be a HUGE oil exporter to the USA. Not anymore...and soon no one will be...) I would be very wary of anything priced in Canadian dollars here...i could very easily see a massive devaluation "to the North" setting the stage for some real fireworks around the world. I wouldn't want to be long the pound or euro if that happens either. I will be poking around up North if that becomes the case as "there is a lot of valuable living space in Canada." no it won't be in Toronto or Vancouver. How convenient for the Federal Government to go after S&P right now of course. But i don't think it's going to make any difference if the result is global currency debasement. I would imagine Venezuela is a LARGE debt holding for many outside the US. Canada is right up there as well. (any devaluation up there will result in inflation. up there.) should be a wild week globally next week...

Fri, 02/08/2013 - 22:54 | 3228056 ISEEIT
ISEEIT's picture

Dude...(bitch?), with everything as 'globalized' as it is now...WE are all fucked. This is centralization such as mankind has never before been subjected to.

This is what cowardice and ignorance deliver.

FORWARD!!!!

Sat, 02/09/2013 - 09:18 | 3228478 GetZeeGold
GetZeeGold's picture

 

 

The good news is that precious metals are being subsidized like a bitch right now. I don't see how they have any other choice.

Fri, 02/08/2013 - 23:10 | 3228078 OldNewfy
OldNewfy's picture

Hmmm, Canada might be probably is in deep doodoo, I agree. But Venezuela heavy crude (the erstwhile competitor to Cdn diluted bitumen) at the US Gulf Coast will still be bought and sold in $USD like the fungible commodity it is, no? The sovereign Venezuelan oil companies will still be paid in US dollars, I'm thinking.

In 2002 Venezuela was providing 438 MMBbl/y to the Americans ( 13.1%) versus Canada's 527.3 MMVbl/y ( 15.8%). Fast-Forward to 2012, Canada's up to 877 MMBbl/y ( 28%) and the Venezuelans have slipped back to 326 MMBbl/y ( 10.4%). My tinfoil hat perception is that more Cdn bitumen has been brought online, we're choked full at Cushing, the there are no ( or relatively few - like Wood River) new Delayed Cokers being constructed and started up. That $40 differential Light to Heavy is crushing forward planning for heavy oil projects here in Alberta, except for the operators with excellent reservoirs.

DV makes a good point about external holders of sovereign Venezuelan debt, and inflation is softly creeping into Canada,  without question.  There is very little discussion of Mark Carney's monetization - the only place it seems to gets sensible discussion is here on ZH.

Sat, 02/09/2013 - 00:21 | 3228171 earleflorida
earleflorida's picture

"Where does America get it's oil? You may be surprised!

*Now... before you throw cold-water on the 'NPR`Report', the analytical/ factual material being presented is from the Nat'l Petroleum Institute. 

Please note:  Nigeria is a accident waiting to happen with american drones now safeguarding the entire continent-- Venezuela is about to go ballistic with Hugo's devaluation. Mexico's well's are running dry, and the oil is the shittiest dirt-sludge in the America's, while Canada is in 'deep doodah', regarding the 'Loon'! Lastly, Obi's negligence regarding America's 'Blue Gold' is years away from realistic production, because of Re-regulation, and no real energy program implemented, except for wind,solar, and ethanol, BS etc.! Basically we're fuck'd... or, we can just start a war?

http://www.npr.org/2012/04/11/150444802/where-does-america-get-oil-you-may be-surprised

Ps. Funny, I was just thinking how ironic it would be if we annihilat'd our race from the face of the planet over 'Fossil Fuel' ~500 mnl - 750 mln years old, give or take a couple 100 million years. Then in a cosmos light-year?, another race evolves, quite like ours and ends up fighting for the last drop of 'primordial modern man's' own... fossil fuel? Wow!!! The circumference of life... on a mystical journey to no-where linear`ity?

jmo

thankyou Tyler

Sat, 02/09/2013 - 21:07 | 3229648 Venerability
Venerability's picture

Venezuela is "about to go ballistic" only in the fevered imaginations of the Financial Times and Barclay's, which have been correct about - what was that word? - Oh, I know - NOTHING!

Regional and local elections a long, long time ago . . . No, three whole weeks ago! - and the hated, despised, on their last legs Chavistas won pretty much everything, in closely monitored, i.e. FAIR, democratic elections.

In fact, much fairer than Florida, I believe, where 80 year olds were made to stand in lines in the hot sun for ten hours to vote.

Clearly, Reince Priebus needs to shift his focus to Venezuela.

Sat, 02/09/2013 - 10:15 | 3228549 q99x2
q99x2's picture

I've known David Bloom from Ethanol is a Gas fame since the 80s and he and what he has been saying is for real. Brazil is and has been laughing at the rest of the world for using oil to run their vehicles. Ethanol is not being used in the US because of the oil cartel. And, you don't need to use farmland or corn for ethanol.

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