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Weekly Bull/Bear Recap

Tyler Durden's picture




 

From Rodrigo Serrano of RCS Investments

Weekly Bull/Bear Recap: Jul. 2-6, 2012

Bull

+ The U.S. economy continues to grow; recent data is only a pause that refreshens.  

  • The consumer is resilient in the face of slowing economic conditions abroad.  The National Restaurant Association reports that performance and expectations for May are near 2006 levels. Meanwhile, auto sales rebound, surprising most analysts. 
  • U.S. Rail Traffic continues to show an expanding economy and two key sectors of the economy, autos and housing, are poised to lead a re-acceleration of growth.  
  • Construction spending for May surges the most in 5 months, signaling that activity has finally bottomed and will be a job creator in the quarters to come.  
  • Speaking of job creation, ADP reports a stronger pace.  Meanwhile, jobless claims fall under 380K for the first time since mid-May, planned job cuts plunge to a 13-month low, and the Monster Employment shows growing labor demand.  While the BLS job report is below expectations, wage growth firms up and the average workweek ticks higher.  

+ Gas prices have plunged over the past 3 months, while ISM Prices-Paid subcomponents are in deep contraction territory.  Conditions are ripe for the Fed to initiate another QE and confirm that central banks are coordinating policy, causing a turn in sentiment and a powerful rally.  

+ Meanwhile, China has plenty of ammunition for additional stimulus.  However, the economy is stabilizing on its own as per China’s non-manufacturing index, which rises to a 3-month high of 56.7.  There will be no hardlanding in China.  Monetary officials are loosening monetary policy, setting the stage for a strengthening recovery over the 2nd half of the year.  

+ German factory orders come in better than expected and is good news for the exporting powerhouse.  Global growth has weakened but will stabilize soon.     

Bear

- Investors are giving the thumbs down towards solutions presented at the latest European summit .  Spanish yields are back within striking distance of 7%, while Italian bonds are above 6%.  Core-countries are reneging on providing unconditional help to the periphery.  A crisis of confidence is set to fragment the Eurozone.  We are at most weeks away from a negative worldwide financial shock, leading to a global recession.  

- Merkel is under increasing pressure from officials in her native Germany.  The CSU, the Constitutional Court, and now the President of the Bundesbank are making it clear that political will in Germany has been exhausted.  A referendum must take place.  Meanwhile, the Greek government is set to collapse again soon.  The ECB cut interest rates, but it isn’t enough for the QE-addicted market.  Finland says the “unthinkable.”

- U.S. economic data continues to point to increasing sluggishness and ultimately a recession.  The ISM June’s manufacturing index turns in its first contraction print in 35 months; important leading indicators — New Orders and Backlogs — are in solid negative territory.  While ADP shows an improved labor market, the BLS has a different account of its health.  Weekly consumer metrics are showing significant weakness and outlooks in the retail sector are getting slashed.  

- Global economic data continues to disappoint.  Euro-area unemployment climbs to a record 11.1% in May.   The bulls were wrong, Germany did not decouple from the rest of Europe, as May’s PMI fell to a 3-year low and weighted on a gloomy Eurozone PMI.  Slumping New-Orders for most PMIs signal global recession has arrived.  Globally coordinated interest-rate cuts smell of panic.  

- “But trust is shattered at the very top of the financial system.

 

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Fri, 07/06/2012 - 17:28 | 2593334 bank guy in Brussels
bank guy in Brussels's picture

Spanish banker Rodrigo Rato of Bankia facing criminal proceedings ...

Quite different than how bad bankers are handled in the Anglo countries

John Ward's 'The Slog' is quite good, partly Brit-centred, but he has some EU crisis news you don't even see on ZH -

http://hat4uk.wordpress.com/2012/07/06/spanish-crisis-former-imf-and-ban...

Fri, 07/06/2012 - 17:29 | 2593339 Hype Alert
Hype Alert's picture

Loop logic.  Fail.

Under the Bull section we have:
Conditions are ripe (Read: see the Bear section) for the Fed to initiate another QE and confirm that central banks are coordinating policy, causing a turn in sentiment and a powerful rally.

So, things suck so bad we need another fix of QE, so things are good!  It just baffles the mind.

Fri, 07/06/2012 - 17:31 | 2593343 Vic Vinegar
Vic Vinegar's picture

The consumer is resilient in the face of slowing economic conditions abroad.  The National Restaurant Association reports that performance and expectations for May are near 2006 levels.

No shit.  We live in the empire.  People dined at the Olive Garden-equivalent during the last days of the Roman Empire, too.  Why not treat yourself to a never-ending-salad and breadsticks tonight?  Life is good for now.

Fri, 07/06/2012 - 17:38 | 2593371 Duke of Con Dao
Duke of Con Dao's picture

Tyler

you forgot ole' Barclays Bob Diamond taken out to the woodshed as seen here: 

YouTube - UK Parliament Questions Barclay's CEO Bob Diamond: Complicity or Incompetence? Which is it?

Fri, 07/06/2012 - 20:45 | 2593773 I should be working
I should be working's picture

Everything is awesome, because I said so. Get back to work, because everyone can't live on food stamps.

Obummer - 2012 - I guess we can?!??

Amerika Fuck Yah!!!!

Fri, 07/06/2012 - 20:58 | 2593811 orangegeek
orangegeek's picture

Markets continue to push higher and then hand it all back in a day.

SP500 is a good example.

 

http://bullandbearmash.com/index/sp-500/hourly/

Fri, 07/06/2012 - 21:01 | 2593822 mayhem
mayhem's picture

so I should still be long right? Darn I keep getting this wrong.

 

 

Fri, 07/06/2012 - 22:31 | 2594020 adr
adr's picture

Auto sales are "good" based on channel stuffing.

Retail sales are "good" due to channel stuffing and accounting practices that would make Madoff jealous. Stores are cancelling sales because they haven't even sold enough inventory at fullprice to make up for the revenue lost during a sale. I have heard this from numerous buyers and retail managers.

It doesn't matter what producers are paying to manufacture goods, if nobody is willing to buy the inventory. HELLO, McFLY ANYONE IN THERE!!!

Rail traffic is expanding because of shipping all that unsold inventory all over the country, and record exports of gas, coal, and other commodities out of America. Tell me how exporting gasoline helps average americans again?

Gas prices? Oil dropped from $100 to $77 and averaged $85 for the past two months. Instead of sub $3 gas, most of the fueling stations in the country barely dropped. In January I paid $3.79 for gas, yesterday I paid $3.69 for gas, we did get $3.39 for a week. WOW!!! Go bullish indicator!

Publicy traded builders can't stop building. Rather than finish the thousands of projects left half finished, better to start new ones and make it look like new construction is picking up. Makes the stock look better.

China has already had a hard landing, the investigators just can't find the wreckage. Production of consumer discretionary items has flatlined.

As always the bull case is based on nothing but the fumes floating around Bernanke's toilet.

Sat, 07/07/2012 - 10:45 | 2594655 SmoothCoolSmoke
SmoothCoolSmoke's picture

IMO, SP slides due to earnings, EU, etc., until we get to Jack-ass-son Hole, then cue QE for the election.

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