No6's Financial Markets Thread

[No6]

Monetary value sure looks both arbitrary and precarious. This is at the heart of my hyper-deflation outlook; monetary value eroding from both financial assets and currencies. imo this is the "fundamental" background against which the value of markets are eroding.... even as they seem to be supported in nominal terms. Yet, even nominal support could go pretty quickly when investors realise that the "Bernanke put" of QE is not a certain thing. The put only works as long as the "helicopter threat" remains credible.... and this is starting to wear thin.

 

Or the put may work as long as there is some inflation, which is basically what the markets want and limited asset price deflation going forward.

 

The "quick buck" can be made over various time frames... or not. I prefer the medium term "position" trade.

 

There's obviously an important distinction to be drawn between investing and trading. Investing is, as you say, buy and hold for a [very] lengthy period. There is some risk involved but it's perceived to be reasonable and minimal.

 

Trading on the other hand seeks out risk and volatility over a shorter time frame; take the right side of a trade, at the right time, and then sell again for a profit.

 

But then I don't think investing and trading should be completely dichotimized. I mean, the trader surely has in the back of his mind some idea of "fundamentals" [the challenge is not to be completely dominated by them] while more focused on market behaviour. Then also is the question of how exactly one is to take profits today [in which currency].

 

I've settled on trading as a hedge to my core investment: sit and hold gold; trade the volatility of silver for dollars. By trading strong but contrary currencies, risk and anxiety levels are kept to the bare minimum.

 

My criticism of buy and hold investors is that they often fall in love with what they are holding and forget to sell. This may be ok for those that are getting a rising income from their buy and hold investments, or in the case of many gold holders, a belief that it is real money so they would prefer to hold it regardless, but for many that fall for the industry mantra buy and hold for the long term, more often than not they get screwed in the end.

 

When it comes to technical v fundamental analysis, I find that increasingly for my own research the charts tell me what I need to know. I look at the fundamentals to back it up. If I had to pick just one, it would be the charts.

 

[No6]

One for those who like a company still growing, but pays a decent growing dividend as well. Will Tesco rule the retailing world?

 

Tesco has already gobbled up Britain. Now it's looking to repeat the trick in Asia, and there's a good chance it will pull it off. The group has sought to whet investors' appetites by flying analysts out to the region to show them what it is up to, unveiling some fancy looking targets for the Chinese operations (a plan to quadruple sales in five years) in the process.

 

The potential of the market is dizzying and over time it ought to become the company's biggest. By 2025, there are expected to be 221 cities with a population of more than a million, against 35 in Europe, cities populated by a fast expanding middle class. To capitalise on this, Tesco is to build hypermarkets in second and third tier-cities in the coastal provinces with 110 open by February 2011. By 2015 it should have 200 hypermarkets in total – less than previously expected, but the sales growth targets are ahead of market expectations.

 

Who'd bet against Tesco pulling it off? It hasn't been without the odd mis-step along the way, but the group has shown that it is possible for a British retailer to succeed overseas.

 

And it isn't just China, where like-for-like sales growth of 8.9 per cent over the nine weeks to 31 October suggest the targets are achievable. South Korea (6.7 per cent), Thailand (3.4 per cent) and Malaysia (0.5 per cent) are all ahead. Only Japan (down 5.7 per cent) has disappointed although remedial action is under way.

 

http://www.independent.co.uk/news/business...co-2141302.html

[No6]

Once the markets settle from their current retracement they might look back on evidence like this to justify the next move up.

 

U.S. Economy Expanded at 2.5% Pace in Third Quarter

 

The U.S. economy grew at a 2.5 percent annual rate in the third quarter, more than previously calculated, as companies increased shipments abroad and Americans boosted their spending.

 

The revised increase in gross domestic product compares with a 2 percent estimate issued last month and a 1.7 percent rise in the second quarter, figures from the Commerce Department showed today in Washington. Corporate profits grew last quarter at a slower pace and an increase in employee wages in the prior three months was almost twice as much as initially reported.

 

http://www.bloomberg.com/news/2010-11-23/e...ed-from-2-.html

[No6]

FTSE Daily chart looks like the Bollinger Band is opening towards the downside. Wouldn't be surprised to see 5400 hit if this continues the rest of the week.

 

 

Meanwhile SUK2, FTSE 100 super short looks to have broken through its downtrend. Bollinger Band looks to be opening upwards.

 

[Mabon]

One for those who like a company still growing, but pays a decent growing dividend as well. Will Tesco rule the retailing world?

 

Ah that Independent article doesn't do them justice.

 

Firstly they are the 3/ 4th biggest Retailer in the world. Their plan is to overtake number 3 (AFG? German based group, became bigger in 2009 due to amalgamation, not organic growth) and 2 (Carrefour). And be the second biggest Retailer in the world by 2020. And then give Walmart a kicking by 2025.

 

More importantly is the way they run their business.

 

Most very large corporations are hidebound and find innovation difficult. Tesco's though have taken a leaf out of the small to medium sized company rule book. They spin off parts of their business and run them like a bunch of smaller, more nimble startups.

 

This allows their Central European clothing arm , for example, to grow by 47%, 55% and 67% per year (2008, 2009 qnd 2010 figures). This from zero in about 2007. They repeat this across their business. The numbers are staggering.

 

Also what most commentators don't give Tesco's credit for is they are a fully integrated global manufacturing, distribution and retail business. It'd be a brave company that wants to tussle with the mighty Tesco's. Hence why I own a wadge of their stock.

 

No other retailer in the UK is anywhere near them in terms of buying power.

[jerpy]

My criticism of buy and hold investors is that they often fall in love with what they are holding and forget to sell. This may be ok for those that are getting a rising income from their buy and hold investments, or in the case of many gold holders, a belief that it is real money so they would prefer to hold it regardless, but for many that fall for the industry mantra buy and hold for the long term, more often than not they get screwed in the end.

 

Well here's my bellweather ISA pick and has been for a number of years. Revenues up, profits down and dividend cut presumably in the face of a severe OFWAT mauling BUT as noted by the F.T

 

Severn Trent kicked off the interim results season for Britain’s listed water companies on a relatively upbeat note by unveiling plans to lift its dividend by slightly more than most brokers had expected.

 

Severn Trent said on Tuesday that it would lift subsequent pay-outs at a pace equal to the retail price index plus 3 per cent, which was at the top end of analysts’ forecasts.

 

The board declared an interim dividend of 26.04p (26.71p). The shares fell 9p to £14.50.

 

http://www.ft.com/cms/s/0/a419c962-f729-11...l#axzz168UAT5Ab

 

Maybe time for a breather? Mind I halved my stake at the last results and ended up buying them back slightly higher At least I rectified the mistake.

 

[G0ldfinger]

QE is about perceptions [and ideology] more than the "fundamentals".

With respect to nominal prices, there is nothing more fundamental than the amount of currency in circulation. This is not a matter of belief, but a fact.

[G0ldfinger]

GF, putting aside the property bull/bear debate, what happens to property values in a hyperinflationary environment? What happens to mortgages?

Bubb (and some others, maybe incl. me) made a few good posts on this subject some time ago. If you only have a mortgage for your own home, you are best off under fixed IRs obviously. Under flexible ones, you have the problem that the repayment could grow much faster than your income (most likely). As a BTL you are truly screwed, since the first thing a government does in HI is fix rents (to avoid homelessness), while at the same time the chavs will come at night and rip everything out that can be sold. Screwed.

[G0ldfinger]

... I think I would rather have a kalashinikov than gold. With the former I can get plenty of the latter when the time comes.

(Kalashnikov <-> Gold) = (Chicken <-> Egg)

[No6]

(Kalashnikov <-> Gold) = (Chicken <-> Egg)

 

This is a debate in itself and probably not for this thread (if only because it would get lost amongst other things as I wouldn't want to turn this into just another gold thread - no offence meant), but I just think that in a total breakdown of lawlessness, the equation is quite simple. (1) Organised crime, malitias, psychos, extreme political groups, etc, (i.e.) not very nice people perhaps with no gold (and let's assume that gold is sought after in this situation for arguments sake) v (2) the law abiding, unarmed citizen who just wants to protect their wealth against what the economic system before breakdown was doing to them. In this scenario, number 2 better keep their heads down unless they have the type of physical presence to compete with (1). My guess is that most will not and probably live in more fear than before order broke down as 1 can simply take from 2 at will, that's why a total breakdown is not good for anyone, especially gold holders. What you really want is the crisis in paper money to go so far before resolving itself in one way or another, but law and order remains, that way gold holders may well get the reward they are hoping for.

[No6]

A Naked Trader indicator.

 

Markets

 

Well, the back end of November continues to be challenging as it always is... plenty of volatility, nervousness, fear and greed... yes it's all there.

 

So I'd expect a lot of heavy ups and downs for the next couple of weeks. Indeed it was well up yesterday and well down today.

 

The one thing really is short-term a lot of us probably would like the market to go sideways or a little down hopefully not affecting our stocks too much because if that's what it does it sets up a nice big rally into Xmas up to 6.200 ish.

 

But if it went up much more now that may not happen. Funny old things, markets aren't they?

 

And if there is one good short signal for next week it's that I have a seminar coming up next Friday. And almost inevitably shares go down in the days up to my November seminar. Every year! And every year seminar day has proved a good time to buy as the markets start to rise!

 

http://www.nakedtrader.co.uk/index.htm

[No6]

Reasons to stay long on stocks (the run up to this article was on post 6 on this thread. The No. 1 Reason for Optimism Today)?

 

Stay Long Stocks

By Dr. Steve Sjuggerud

Saturday, November 20, 2010

 

In the September 1 DailyWealth, my headline was "There's a 98% Chance Stocks Will Be Higher in 90 Days."

 

The simple message was this: Investor pessimism was so bad at that time, it couldn't get any worse... So it was time to buy.

 

We nailed it... The day that story came out, stocks started to soar. And stocks didn't stop for a breather for the entire months of September and October.

 

But now a big change has happened...

 

Investor sentiment has shifted 180 degrees since September 1. Today, every type of investor is wildly optimistic about stocks.

 

So what should we do? If the situation is the opposite of September 1, does that mean it's time to sell?

 

No.

 

I could be wrong, of course. But I believe it's worth it to hang in there. Let me explain...

 

Investors have finally figured it out. They now believe Fed Chairman Ben Bernanke will keep printing money until someone takes the keys to the printing press away from him. So they're no longer scared.

 

Based on many recent surveys, investors of every stripe are bullish. You name it – portfolio managers (as measured by the Merrill Lynch survey), newsletter writers (as measured by the Investor's Intelligence survey), and individual investors (as measured by the AAII survey)... they're all super optimistic.

 

Typically, when everyone is optimistic, it means everything good that can happen is already priced into stocks... it means you're set up for a near-term peak in stock prices. But not always...

 

Extremely bullish sentiment does not always mean we're at a top... particularly if you've got a strong bull market, which I believe this Bernanke Asset Bubble Market is.

 

http://www.dailywealth.com/1538/Stay-Long-Stocks

[No6]

I've an example of a share that just might be changing direction that it might be worth following over the next few weeks, if only to see what happens. It is FTSE100 Oil company Cairn Energy. Daily charts below show that after a long move down, price seems to have found support. Parabolic sar indicator has just turned positive and other indicators seem to be moving in the right direction. Could be consolidating before a Santa Rally. Let's see if the support holds or goes into reverse.

 

Current price around 379p, the low hit a few days ago around 361p.

 

 

 

Weekly chart still negative, but support seems to be holding for now.

[No6]

Enough good news building up for a Santa rally run in to the end of the year?

 

Economy Shows Life as Spending Rises, Jobless Claims Drop

 

Americans increased spending for a fifth month in October and filed the fewest unemployment claims in more than two years last week, pointing to strength in the largest part of the economy as the fourth quarter began.

 

Household purchases advanced 0.4 percent after a 0.3 percent gain in September that was larger than previously estimated, the Commerce Department reported today in Washington. Incomes climbed 0.5 percent. Jobless claims fell by 34,000 to 407,000 in the week ended Nov. 20, Labor Department figures showed.

 

Stocks rallied and Treasuries declined as the reports, along with a better-than-forecast increase in consumer sentiment, boosted the outlook for holiday-season spending at retailers including Wal-Mart Stores Inc. A slowdown in inflation validated the Federal Reserve’s case for a second round of unconventional monetary stimulus.

 

http://www.bloomberg.com/news/2010-11-24/u...es-rebound.html

[No6]

Traders Raise Bets on Early Canada Rate Rise on Strong Data: Canada Credit

 

Traders are increasing their bets that Bank of Canada Governor Mark Carney will resume raising interest rates as soon as next quarter on speculation that pessimism about the global economic recovery is overdone.

 

Yields on the June 2011 bankers acceptances contract, a barometer of short-term rate expectations, rose 16 basis points in two days after a report showed Canadian inflation grew faster than all 23 economists in a Bloomberg survey predicted. That’s the biggest two-day rise since Bank of Canada policy makers last raised the benchmark overnight rate on Sept. 8. The contract reached 1.73 percent today, the highest since July 14.

 

http://www.bloomberg.com/news/2010-11-25/t...ada-credit.html

[No6]

Not all bad news from the public sector cutbacks for some. These companies are currently out of favour because of the cutbacks, but does this suggest t here may be more outsourcing of public sector work to come?

 

LONDON (ShareCast) - Outsourcing giant Serco has won a £200m eight-year contract with Hertfordshire County Council to provide a range of front and back office operations.

 

Serco will overhaul the council’s internal business processes, develop customer services and co-operate with the council on achieving cost savings of at least £25m.

 

More than 400 council employees are expected to transfer to Serco when the contract starts in April, as the outsourcer takes over processes such ICT (information, communications and technology) services, finance, payroll and personnel functions, as well as support services such as facilities management, customer contact centres and occupational health.

 

Under the partnership agreement, these shared services and enhanced capabilities will also be offered to other public sector bodies in the area, including Hertfordshire's ten district councils and the county's police authority.

 

Hertfordshire County Council has been a customer of Serco for 18 years but the new contract is significantly larger in scope and value than the existing £8m per annum service.

 

http://www.digitallook.com/cgi-bin/dlmedia...tory_id=3853593

[No6]

FTSE approaching the supporting trendline. Key week ahead maybe. Still think that around 5400 is a major support level.

 

[No6]

So, how is the one to watch, Cairn Energy doing at the moment? Looks like it is facing its first trend line to get through to start a new trend. So far things look good for a reversal of the trend, but it needs to steady out from here and then make a further surge up to break the recent downward trend. Bollinger band looks to be opening on the upside and even though the market has been down today, CE has gone against the market. Currently 396p.

 

[No6]

One oil services group that I like is Wood Group. Today they secured a pretty big new contract.

 

Wood Group secures $875m contract in Israel

 

LONDON (Dow Jones)--John Wood Group PLC (WG.LN) said Tuesday its subsidiary, Gas Turbine Services or GTS, has been awarded an engineering, procurement and construction, or EPC, contract valued at $875 million from Dorad Energy to build an 800-megawatt, natural gas-fired power plant in Israel.

 

The international energy services company said the Dorad Power Plant is expected to be online within 36 months and when completed will represent around 8% of Israel's total installed power generation capacity.

 

Wood Group said GTS has full responsibility for the combined-cycle plant, from design, procurement and construction through to commissioning and handover, adding that the combined-cycle power plant will utilize 12 natural gas-fired turbines connected to a heat-recovery steam generator that will provide steam to run two steam turbines.

 

Evolution Securities analyst Keith Morris said the award underpins his confidence in the recovery in this underperforming division.

 

http://online.wsj.com/article/BT-CO-20101130-703240.html

[No6]

FTSE needs to make a stand here otherise 5400 is likely to be tested.

 

[No6]

No wonder the FTSE is looking up.

 

UK manufacturing activity hits 16-year high

 

• Strong PMI survey boosts hopes of private sector-led recovery

• Eurozone and China manufacturing also improved

 

UK manufacturing experienced an unexpected surge in November to a 16-year high, according to fresh data which indicates that the sector is staging a healthy recovery from the recession.

 

The strong growth in manufacturing boosted hopes of a revival in the private sector, and comes as separate surveys today suggesting strengthening manufacturing sectors across the eurozone and also in China.

 

The Markit/CIPS manufacturing Purchasing Managers' Index rose to 58 in November. Any number above 50 signifies growth rather than contraction, and the figure is the highest the index has been since September 1994. The hiring part of the index was particularly strong, showing that manufacturers took on staff at their fastest rate since the survey began 18 years ago.

 

==================

 

The strong figures came amid further encouraging manufacturing data in both the eurozone and China. Eurozone manufacturing activity picked up for a second successive month in November. The eurozone PMI improved to a four-month high of 55.3 in November from 54.6 in October and 53.7 in September. Meanwhile China's Purchasing Managers Index rose to 55.2 in November from 54.7 in October.

 

http://www.guardian.co.uk/business/2010/de...turing-pmi-high

[Van]

No wonder the FTSE is looking up.

 

But it is looking increasingly like a counter-rally within a downtrend - look at how the 21dMA has rolled over and is now trending down. BigMO is on the side of the bears now (for FTSE at least).

[No6]

But it is looking increasingly like a counter-rally within a downtrend - look at how the 21dMA has rolled over and is now trending down. BigMO is on the side of the bears now (for FTSE at least).

I'm not convinced either way at the moment. The weekly chart is developing a downward trend, but the daily chart now looks a little stretched having been falling, more or less since early November. Trend is down, but the Bollinger Bands are not opening on this move with any conviction to indicate a steep fall from here. There is the potential to reverse to the upside on the daily charts. Whether there is more immediate mileage to come on the PIGS story to keep the bears hoping into the new year I don't know, but the next week or so may determine whether we are going to get the Santa rally or not. If this is a bigger bear trend forming then I would look to the FTSE to give back most of today's gains fairly quickly, the next day or so. On the other hand, if the markets continue to go up from here, then the bears may have to wait until the new year and hope for more bad news then. The FTSE will most likely follow the US regardless anyway.

[No6]

China Leads Asia Manufacturing Rebound

 

SINGAPORE—Manufacturing in Asia gathered steam in November, led by a strong acceleration in China, an encouraging sign for a global economy rattled by Europe's debt crisis and sluggish growth in the U.S.

 

==================

 

"China is enjoying very strong momentum. This bodes well for fourth-quarter growth and for sentiment in markets in Asia," said Dariusz Kowalczyk, an economist at Credit Agricole Corporate and Investment Bank. "If China is accelerating, it means concerns over a global economic slowdown may be exaggerated."

 

http://online.wsj.com/article/SB1000142405...0374498360.html

[No6]

European companies are heading into 2011 with almost $700 billion in cash, raising pressure on executives to do deals, boost dividends and buy back stock.

 

Total cash holdings at 466 companies in Europe were $691 billion at the end of September, or 16 percent higher than at the end of 2007, the year the financial crisis began, data compiled by Bloomberg show. Nestle SA, which didn’t report third-quarter figures, is also sitting on $30 billion in cash.

 

Europe’s largest companies held back on acquisitions and payouts this year as the spreading sovereign debt crisis threatened to undermine earnings and revenue growth. Investors want companies to put their reserves to work in 2011 to help spur increased returns for European stocks, which are headed for their smallest gain in more than a decade this year.

 

“2011 will be an M&A year and a year of share buybacks and increased dividends,” said Claudia Panseri, head of equity strategy at Societe Generale. “The total amount of cash will decrease going forward because of these three uses of cash. Considering the risk linked to sovereign debt, having safe dividends and cash-rich companies is a good protection.”

 

http://www.bloomberg.com/news/2010-11-30/e...l-deadlock.html