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

Tyler Durden's picture





 

Via Rational Capitalist Speculator,

Bull

+ In Euroland, ECB’s Draghi warns the bears: “believe me, it will be enough” on resumed sovereign bond buying.  Chatter of a banking license for the ESM is sure to cause a shift in elevated bearish sentiment.  The Bundesbank may oppose these measures, but it’s best to ignore them, given they only hold 2 out of 23 votes on the ECB board.  Spanish and Italian bond yields plunge in response and risk markets rally (S&P 500 hits a new high this week from early June lows).  The Eurogroup and Merllande state that they remain committed to preserve the Euro’s stability.  Again, Draghi: “They don’t recognise the political capital that our leaders have invested in this union and Europeans’ support. The euro is irreversible.

+ China looks to be experiencing a soft landing as the HSBC/Markit Manufacturing PMI is only a few tenths away from expansion and is at its highest level in 5 months.  Backlogs are now in positive territory.  Leaders are “bringing her in” and the trajectory is looking good.  Copper is sniffing this development

+ “Don’t fight the Fed.”  In the past, it’s been extremely unprofitable to do so.  Officials will do what is necessary to quell market fears regarding the Eurozone.  Meanwhile, lower interest rates are helping consumers’ income statements as refinancings reach their highest level since April 2009. 

+ While investors are up in arms about what’s going on in Europe, “It’s not as bad as many think.”  Market indicators show dramatically reduced probabilities of default in Portugal and Ireland, while Spain’s $900 billion of debt is already priced for a 20% haircut and is “a drop in the bucket” when considering total worldwide debt of roughly $50 trillion.  Everyone knows that Greece is going to default, markets move when there’s a surprise; clearly there isn’t one here.  Continued debt writedowns will clear the air and coupled with better than expected corporate earnings and improving sentiment, will set the stage for a sustainable rally.    

+ The resilient U.S. economy continues to grow.  The Chicago Fed National Activity Index rebounds from a weak reading in May.  May travel volume rises 2.3% YoY, the largest gain since 2009.  Increased transportation is a sign of a healing economy, not one about to fall into recession.  In manufacturing, trucking bounces back in June, while growth continues in Kansas City.  In housing, the Federal Housing Finance Agency reports that home prices climbed 0.8% in May on a month to month basis and 3.7% year over year.  Home prices have now risen 4 months in a row and the latest report was better than expected.  This confirms Zillow’s belief that housing prices have finally bottomed, it’s only stabilization or recovery from here.  New Home Sales fall, but for a bullish reason.  Inventory levels are back to healthy levels and the job-creating construction industry is set to restart after a dismal 6 years.  Speaking of jobs, the 4-Week average of jobless claims hits its lowest level since March.  The labor market continues its improvement; no sign of recession here.    

Bear

- Draghi steps up to the plate, but his team doesn’t back him.  Sorry Bulls, No banking license for you (they may have 3 votes, but the reality is they call the shots).  A Greek default this fall is inevitable.  Moreover, Spain reports a worsened economic situation, while more regional authorities request bailouts from the state.  The negative feedback loop is gaining strength.  Falling confidence (EFSF and Europe’s strongest are downgraded by Moody’s while Italy is downgraded further into junk status) has led to a deepening Eurozone recession as per Markit’s July Eurozone Composite PMI; the horizon looks bleak with backlogs shrinking at the fast rate since mid-2009.  Germany’s important Ifo survey falls for the 3rd consecutive month in July.  Greece is in a Great Depression.  So can we finally change the prescription?  Nope, the beatings continue.  Good luck Europe.   

- Global growth is stalling.  Taiwanese industrial production surprises to the downside with its 4th consecutive drop, while South Korean GDP growth was underwhelming.  Chinese officials are underestimating the financial turbulence to come, determined to enforce housing curbs even in the face of continued weakness from Europe.  The U.K. reports a deepened double-dip recession.  Bellwether companies such as UPSSiemensWhirlpoolCisco, and Ford are either cutting outlook/estimates or looking to restructure (ie shed jobs) — for the first time in 3 years, quarterly earnings are poised to drop.   

- The approaching fiscal cliff is damaging sentiment.  Businesses are holding back, a trend clearly visible when perusing the latest Richmond Manufacturing Index, which implodes from -3 to -17 (well weaker than consensus of 0) as well as core-durable goods orders (a measure of business spending)— 3 out of the last 4 readings has been negative.  From Econoday: “Outside of transportation, weakness was widespread in June following a notable gain in May.”  Meanwhile, consumers are saying things are getting worse.

- Confidence in governmental organizations is collapsing - and why shouldn’t it? From former IMF division chief Peter Doyle: “After twenty years of service, I am ashamed to have had any association with the Fund at all.”    

- Civil war continues unfettered in Syria.  Religious tensions are simmering and the worst case scenario of sectarian conflict throughout the region may be close to taking hold.  War games between Iran and the U.S. continue, while Israel bluntly states that it will act if Syrian non-conventional weapon stocks are raided by militants.  Meanwhile, China raises the stakes in an already tense South China Sea.  Schumer says U.S. should play “hardball” on Cnooc’s deal with Nexen; probably because the Yuan as begun to weaken.  Will this turn into a flashpoint for Chinese-U.S. relations?  Beware of oncoming protectionism.

 


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Fri, 07/27/2012 - 17:28 | Link to Comment adr
adr's picture

How can you be called "rational capitalist speculator" with a post like that. I was reading some of the most irrational comments I have ever seen.

Currently China is producing the inventory that will end up in stores for the holiday season. The current uptick in manufacturing is one of the lowest in years. This does not point to a healthy holiday in terms of sales.

Although government statistics and corporate earnings would lead you to believe otherwise, you can't actually sell more product than you produce.

It would be nice if Wall Street employed actual people working in sales and marketing as analysts, instead of the talking head academic bozos they have now. The problem is allowing reality to poke through the puprple haze, wouldn't be good for the index.

Fri, 07/27/2012 - 20:34 | Link to Comment Muppet of the U...
Muppet of the Universe's picture

I will fight the fed with all the money made in other markets, including bonds.  DIE in HELL FED.  QE is for 20% market depreciation protection. 

Not 13000, lets swing for bears with a 16 lbs sledge hammer and see how wiemar republic we can get this bitch.

Fri, 07/27/2012 - 20:33 | Link to Comment Muppet of the U...
Muppet of the Universe's picture

http://www.businessinsider.com/chart-of-the-day-the-us-garbage-indicator...

I can understand printing at 11 or 11.5, but 13, if u do that, I hope every bear out there makes it 10X harder for you.

Fri, 07/27/2012 - 17:47 | Link to Comment Conman
Conman's picture

Dow 13K hat on! Don't make me take it off again , now y' hear?

Fri, 07/27/2012 - 17:55 | Link to Comment Bill D. Cat
Bill D. Cat's picture

The only thing that will get the Dow to 15,000 is the Dow getting to 6,000 .

Fri, 07/27/2012 - 18:00 | Link to Comment Hype Alert
Hype Alert's picture

Actually if they print like Zimbabwe or Weimer, we can go to the moon and beyond.  I posted links to the Zimbabwe stock market and the Weimer market in another thread.  Are we there yet?

 

Zimbabwe stock market.

http://mises.org/daily/2532 

 

Here some charts on Weimer's market. http://www.itulip.com/forums/showthread.php/7110-Weimar-charts

Sat, 07/28/2012 - 08:00 | Link to Comment carefreemanjoe
carefreemanjoe's picture

Don't even have to print. Just talk that they will do anything (read - print as much as required and more) and make the market believe that it will be enough. Bucket shops in the Globalization era.

Fri, 07/27/2012 - 18:20 | Link to Comment tawse57
tawse57's picture

Seems like nothing will take this market down. More missed earnings or low earnings next week and by Friday we could be at 14,000 on the DOW.

This ain't a market for Joe Public. It is rigged IMPO and everything seems designed to lure in retail Joe Public investors and leave them holding the shares just before the market tanks.

Volume, volume, volume.

Fri, 07/27/2012 - 18:37 | Link to Comment Meesohaawnee
Meesohaawnee's picture

no everything is rigged  so that they can gloss over how badly the middle class is getting fucked. It doesnt get presidents re elected now does it? I dont see him standing up to this complete fraud do you?

Fri, 07/27/2012 - 18:53 | Link to Comment luna_man
luna_man's picture

 

 

"tawse57"...

 

KEEP YOUR EYE'S ON THE PRIZE...It will come down and when, it will be down for the count!...NO "btd"...Shorts, will be in hog heaven!

 

Patience, is a virtue

Fri, 07/27/2012 - 19:54 | Link to Comment tawse57
tawse57's picture

Yep, let the market come to us.

Fri, 07/27/2012 - 19:49 | Link to Comment disabledvet
disabledvet's picture

What is bearish is the friggin' Luddites are still in charge. That's on Wall Street, Washington AND Detroit. Ridiculous. "TIME TO GET OUT OF THE WAY" phuckers. New stuff...COMING THRU!

Fri, 07/27/2012 - 20:29 | Link to Comment Yen Cross
Yen Cross's picture

 Super- kala- frastic- ex-p'alik- docious!      The carnival is free, and the fun house, is better than ever!

   Keep your eyes on Sunday traders.  Aussie 10 Year   

  remember these bonds act like a country in surplus! Yields rise on " GOOD NEWS"...

Fri, 07/27/2012 - 21:41 | Link to Comment q99x2
q99x2's picture

Fuck it. The I-Ching gets another toss this weekend.

Sat, 07/28/2012 - 09:14 | Link to Comment overmedicatedun...
overmedicatedundersexed's picture

executive order####, funds, banks,brokers, must buy the S&P, when the sec and fed act. that is our market.

Sat, 08/25/2012 - 09:47 | Link to Comment pravid
pravid's picture

Give it a bit of time. It took a few months after QE2 for the liquidity to dry up. LTRO2 will be the same. Just in time for Spain and Italy to come on deck. It's going to be a hot summer. site giant | site giant | site giant | sitegiant | site giant

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