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Weekly Bull/Bear Recap

Tyler Durden's picture





 

Via Rational Capitalist Speculator,

Weekly Bull/Bear Recap: Jul. 16-20, 2012 

Bull

+ Housing continues to show signs that the worst is finally over and that the recovery is slowly gaining strength.  Improvement on the margin is becoming clear.  The NAHB Housing index rises by the most since 2002 to its highest reading since 2007. Housing starts rise to their highest since October 2008 and are up 40% over the past 18 months (permits remain in an uptrend).  Higher starts than completions signal that job creation is coming soon as the latter catches up.  Meanwhile, refinancing through the HARP program is gaining momentum, leading to improved income streams for many consumers.

+  Manufacturing remains a sturdy sector for the U.S. recovery.  Despite a negative reading in the ISM’s latest survey, the hard data tells a different story.  Total output rises 0.4% in June, led by a 0.7% rebound in manufacturing, to a new post-recovery high and more than reversing a decline of 0.2% in the prior period.  Output has expanded for 29 consecutive months.  YoY rates for Industrial and Manufacturing Production are 4.7% and 5.6% respectably, still reasonably healthy.  Production of business equipment remains in solid growth territory.

+ Global economic activity is stabilizing and growth is set to resume in the coming months.  China has begun preparations for additional spending/stimulus and copper is starting to sniff this strengthening development (3-Mth chart view is best).  The country’s housing market is already heating up.  Meanwhile, Italian Industrial Orders are stabilizing, rising by 1.7% in May, offsetting a 1.8% drop in the prior month.  Moreover, Spanish Industrial New Orders also came in better than expected; the country’s OECD leading indicator shows stabilization in the coming months.      

+ The U.S. economy is dynamic and is transforming before our very eyes.  Exports, shale gas/oil investments, and oil discoveries are new fountains of growth.  Consumer deleveraging has come far and home prices are enticing for long-term investment.  Furthermore, China is finally embarking on the path towards becoming the next world’s consumer.  This is undoubtably bullish.   

+ Risk assets are holding up well, even as investors are concluding that QE3 may not be forthcoming.  Furthermore, short-interest is at levels preceding powerful bullish moves, such as in Q3 2011: “To the extent people have gone short U.S. domestic equities, I think they’re kind of wasting their time” — Michael Shaoul.  Continued bearishness means there’s a wall of worry to climb…   

+ …Furthermore, earnings reports from international  companies have surpass expectations.  Continued signs of stabilization in global economic conditions will lead to higher stock prices.  Tech has been buoyant even in the face of all the sour macro news.  The market’s reaction to the news is more telling than the news itself.         

Bear

-  In Spain, home prices are absolutely imploding, bad loans are mushrooming, and bank deposits are dwindling.  Valencia signals distress and taps assistance from the government.  The results?  A Spanish Treasury official says there’s “no money left to pay services” and sovereign bond prices collapse (so much for the summit); 100 billion euros will not be enough to shore up Spain’s banking system.  Meanwhile the ECB reverses its position and now advocates imposing losses on senior bondholders of slumping financial companies.  The threat of losses is the pin to pop the “Moral Hazard Bubble.”  Meantime, Germany says sovereigns will still be responsible for bailout money; the country’s economic sentiment report falls for the 3rd consecutive month; and Deutsche-marks are making a comeback.  Moreover, 13 Italian banks are downgraded by Moody’s.  The Eurozone has already split according to intra-bank capital flows.       

- The U.S. economy is entering a recession.  The consumer is faltering, evident by the third consecutive drop in headline and core retail sales, both falling for the third consecutive month, the first time that’s happened since the dark days of 2008 (weekly consumer metrics don’t point to a rebound in the immediate term).  Meanwhile, the job market looks to be headed south as per a plunging employment sub-index in the Philly Fed’s manufacturing report as well as the National Association’s for Business Economic report on hiring trends.  These trends are confirmed by both the Gallup Poll’s U.S. Economic Confidence Indicator and the Conference Board’s U.S. Leading Indicator.  Continued suffering in the middle to lower-class is slowly creeping to its breaking point.    

- Bernanke warns on the assumption that funny money will cure all ills (in fact, the “unintended consequences” of ZIRP are clearly making things worse).  The looming fiscal cliff as well as weakness in Europe are together critically damaging confidence.  Both must be resolved he says.  Unfortunately, “it’s out of our hands,” which means that the Fed would be powerless to stop the oncoming contagion from a Eurozone implosion or a crisis of confidence from continued political bickering —likely to lead right up to the final hours.  Meanwhile, how on earth can the bulls say there’s high bearishness out there when the VIX just recently leaked under 16?  This sticks of complacency — there’s continued misplaced hope that Europe will get things done and that China will stimulate the global economy back into recovery.       

- Continued uncertainty in Europe is negatively affecting global business sentiment.  The IMF slashes its global growth forecast, while foreign investment in China falls almost 7% YoY in June.  Premier Wen sure sounds more worried than bullish analysts banking on a second-half rebound.  Global bellwethers are sounding the alarm of a slowing business environment.   

- Geopolitics continues to cast its shadow over the faltering global economy.  Syria is now officially in a “non-international armed conflict,” or civil war; Russia reaffirms its support for al-Assad.  Meanwhile, the Middle East is fast turning into a proxy war among the mightiest.  Israel vows a response against “a global campaign of terror carried out by Iran and Hezbollah” after 5 Israelis are killed in a bus explosion in Bulgaria.  Finally, the thinly covered South China Sea dispute isn’t going away.     

- Housing prices have not bottomed, not when you have rising shadow inventorystagnant purchase applications, and an unclogging foreclosure pipeline.  But keep on building those houses </sarcasm>.

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Tons of info.  Want to know how I see things?  Check out my macro and market outlooks.        

 


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Fri, 07/20/2012 - 15:49 | Link to Comment Michael
Michael's picture

Yeah, a fascinating week.

In Good news today;

NaturalNews exclusive - LA 'authorities' in Rawesome raw milk raids were impersonating public officials

Learn more: http://www.naturalnews.com/036523_Rawesome_District_Attorney_impersonators.html#ixzz21C3pIgfl

 

(NaturalNews) Documents and testimony obtained by NaturalNews allege the following: The Rawesome Foods armed "raw milk raids" and prosecution of James Stewart and Sharon Palmer were carried out in part by law-breaking private citizens pretending to be lawful government authorities. Those individuals -- who have been operating under false labels such as "district attorney" or "LAPD officer" -- may conceivably be liable for millions of dollars in civil and criminal damages for their actions which technically may be described as:

• The armed robbery of Rawesome Foods, including theft of cash
• Willful destruction of private property
• Criminal kidnapping of James Stewart
• Violation of the civil rights of James Stewart
... and other crimes to be described later.

This all stems from the fact that in California, all state "officials" must have sworn and signed oaths of office on file in order to qualify as duly empowered state officials. This is written right into the California Constitution, Article 20, Sec. 3,

Learn more: http://www.naturalnews.com/036523_Rawesome_District_Attorney_impersonators.html#ixzz21C4ML4zY

Fri, 07/20/2012 - 16:06 | Link to Comment nodhannum
nodhannum's picture

Do you think Kalifornia is going to let a little detail like this get in the way?  Just another GM senior debt holder problem...under the bus.

Fri, 07/20/2012 - 16:09 | Link to Comment Fecklesslackey
Fecklesslackey's picture

California = State of Confusion ... think Berkeley, Jerry Brown and the Ninth Circuit

Fri, 07/20/2012 - 16:46 | Link to Comment Precious
Precious's picture

Welcome to United 05/02/12.  This is your pilot.  We are encountering some turbulance.  Please return to your seats and fasten your seatbelts. 

Fri, 07/20/2012 - 16:06 | Link to Comment Fecklesslackey
Fecklesslackey's picture

Well people really get riled up about that Raw Milk ... pose as the law to raid raw milk distribution facility. Now, that is real passion

Fri, 07/20/2012 - 16:12 | Link to Comment Yen Cross
Yen Cross's picture

I apologize for , ( tearing you into an asshole) ,Micheal...  You do have some redeeming posts.

  That was the old days, and I understand. +1

Fri, 07/20/2012 - 17:57 | Link to Comment Michael
Michael's picture

Thanks YC. All I really want is every US countryman to have a fair shot at life and don't want anyone's fair shot diminished by the power of the state or by powerful people.

And I truly don't want any money for my vigilance to insure a fair country. 

Fri, 07/20/2012 - 15:59 | Link to Comment PicassoInActions
PicassoInActions's picture

Tyler can you please provide more analysis on the oil supply and demand

I sow an article here yesterday but it was more general than technical.

The question that bothers me all the time is  the price of the  gas at the gas-station. The moment the oil price goes up , the gas stations raise the price the same day. But the oil that is in the gas station was bought some time ago with the different contract. Price. How is that legal to raise the price on the gas that was bought much cheaper and long before the oil price goes up on the market.

Is there any way to find out what is the real correlation between oil price and GDP in real money.

Thanks

Fri, 07/20/2012 - 16:46 | Link to Comment SnakeEye
SnakeEye's picture

How is it legal?  Um supply/demand...   Trying to remember back to econ 101..... So if large changes in price do not ellicit large changes in demand then that makes it a in-elastic curve...   Either way the people continue to buy roughly the same amount of the good no matter what the price.  So again how is that legal?  Its a private contract.  The buyer agrees to pay the higher price if they recieve X amount of gallons... How would it be illegal?  How would the government EVER regulate such an action?  Oh if ol jumps $5 per barrel then price of gas can only jump $.10?  WTF?  what about if nominal price of oil is $30 per barrel?  a $5 swing in price is HUGE... What if Oil is $150 Per barrel?  a $5 swing is small...    It absurd to think the government could actually do something about what price is charged...

Remember back in the 70's when the gov set some price caps on gas?  yeah gas stations ran out of gas.......

 

Mon, 07/23/2012 - 10:05 | Link to Comment Axenolith
Axenolith's picture

I think an unnoticed aspect of this is the steady erosion of small proprietors and "mom and pop" operations in the retail gasoline sales business.  First, note how gasoline has risen in lockstep with higer oil, but then NOT fallen commensurately on the pullbacks.  IDK how it doesn't get reflected in earnings, but gasoline has been at least a buck less a gallon in the past when it was at similar per-barrel prices for oil now.

Twice, in approximately the late 80's and 1998, the regulations were altered to mandate the change out of underground storage tanks (USTs) to address the problem of leaking USTs.  After the first change, double wall fiberglass tanks were an allowed and preferred change.  Around this time Methyl Tertiary Butyl Ether was mandated as a fuel oxygenate and it actually passed through 2X fiberglass tanks.  Then the 1998 upgrade deadline came, and that not only involved meeting a bunch of new double containment issues, but it also ended up seeing a huge swath of 2X fiberglass tanks being replaced.

The end result of this was that most small tank, rural and single store proprietors have been hammered out of the market place by the 100-200K cost of a full UST replacement regime.  The majors are easily able to capitalize the change outs, but the small folks can't, and I believe this has resulted in a gasoline retail field skewed towards gas stations being majority owned by big retail refiners and oil majors.  I believe this allows the retail field to "price fix" on the easy, there doesn't need to be any sort of actual collusion for the retailers to end up fixing prices X% over norm because they will tend to lockstep each other from their natural associations and knowledge.

On a side note, the USPS has spent a pile on this in CA.  I know because over the course of employment at 3 companies, I worked on the newly installed USTs at PO's in the SF Bay area, then on the upgrades in 1998, then on the removal of nearly all of them (with the postal service going to major retailer cards/stations then) in the early 2000's.  I found that particularly disconcerting, commmenting to one official "Oh, so when there is some type of supply disruption in the future we either don't get our mail, or curse you all for getting to cut in line at the stations during the rationing"... 

Fri, 07/20/2012 - 16:07 | Link to Comment Yen Cross
Yen Cross's picture

 I like / DOWNSIDE RISK!   aka risk reward.

Fri, 07/20/2012 - 16:28 | Link to Comment adr
adr's picture

Hmmm, having it both ways again.

How can housing be recovering and faltering at the scame time?

How can the global situation get better and worse at the same time?

How can China grow and shrink?

As usual the bull case is based on manipulated statistics and accounting fraud. The bear recap is based on actual figures and real observations.

Fri, 07/20/2012 - 16:32 | Link to Comment Remington IV
Remington IV's picture

In other words ,

 

ZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZ

Fri, 07/20/2012 - 16:49 | Link to Comment Hype Alert
Hype Alert's picture

That last Bull statement is complete bull.

Sat, 07/21/2012 - 13:12 | Link to Comment Grand Supercycle
Grand Supercycle's picture

As mentioned numerous times, market intervention has only postponed the inevitable.

Despite short and medium term market vacillation - the following remains a constant :

>> USDX monthly indicators [ie big picture] continue to warn of significant long term USD upside. (thus EURUSD & AUDUSD etc bearish)

>> SPX monthly indicators [ie big picture] continue to warn of significant long term downside for equities which will be worse than 2008.

http://www.zerohedge.com/news/2012-12-24/market-analysis

Mon, 07/23/2012 - 10:28 | Link to Comment Axenolith
Axenolith's picture

USD BITCHEZ!  It's the best 2 ply the sweat of your brow can buy!

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