Market Outlook | November 26, 2012

“The wisest mind has something yet to learn.” (George Santayana 1863 - 1952)

Familiar unease

For about three years, common macro-related fears persisted in various financial market conversations. Those worrisome topics stretched from slowing corporate earnings, to a complex cleanup of the European crisis, to decelerating emerging markets. Today, no clarity or certainly exits on these big-picture topics; thus, participants are left to balance their views between collapse and, hopefully, rally. Finding the middle ground is less thrilling, more nuance-oriented and most likely closer to the truth than a simple statistical summary. Plus, the interconnected themes, which are worth tracking for observers and participants, can easily shape and form a consensus perception. Yet, the fears of fundamental and macro concerns are exhausted and dramatic shifts are short-lived.

The last two months demonstrated the suspense of all key macro events and a breather among risk-takers. Yet, risk-takers do not sit on the sidelines long enough, as that would go against human nature. Eventually, money has to be invested somewhere. Betting on upside surprises is still more intriguing than betting on the collapse of known macro issues. As a start, GDP is expected to be revised higher in the US, supporting the building argument of an improving economy. Eurozone concerns may me overstated in some cases, as the German economy is showing signs of recovery and is not as bad as advertised. After all, the German DAX Index is up nearly 24% this year as the leading European economy. Certainly, the thought of Eurozone collapse may linger in headlines, but actual results are not clear-cut. Finally, overall market volatility remains tamed as the low interest rate policy remains in place. This suggests that markets may turn out more stable than the many conventional stories told.

Revisiting old ideas

Five years ago, the themes of housing and emerging markets were favored among fund managers. In both cases the bubble was forming before its eventual burst in 2008. Now, the questions of lessons learned are deliberated by historians, but forward-thinking observers are noticing that history is digested faster than imagined. While most concluded that risk in housing is not fruitful or plausible, the recent trends suggest otherwise on a broad level. The housing recovery in this new era (post-2008) makes a tangible and strong argument for revival. The Federal Reserve Chairman addressed the following point:
“Recently, the housing market has shown some clear signs of improvement, as home sales, prices, and construction have all moved up since early this year. These developments are encouraging, and it seems likely that, on net, residential investment will be a source of economic growth and new jobs over the next couple of years.” (Ben Bernanke, New York Economic Club, November 20, 2012). Of course, sustaining this housing recovery is an uphill battle, which is addressed by economists and analysts alike, especially since the bounce was somewhat inevitable from depressed levels. Nonetheless, momentum is powerful, especially in a world with limited ideas with a compelling growth story. Investors in homebuilders (XHB – Homebuilders Index) have realized more than a 100% gain in the past year. The recent stock market pause enables investors to re-assess conviction levels in housing-related strength.

The second controversial theme from last decade relates to China. This is a tricky theme that has seen explosive development, but for all the growth talk, the Chinese index (FXI) peaked in 2007, way before the noticeable economic pause that’s been debated for the majority of 2012. For a while, the hard landing was greatly feared and over-discussed. Recent data points to a softer landing and increasing investor demand. “They [Investors] have pumped nearly $4 billion into Chinese equity funds in the past two months alone, trying to get in early on what they hope will be a sustained rally.” (Reuters, November 25, 2012). Increasing investor demand makes sense since the Chinese markets are relatively cheap and the momentum from last decade has yet to evaporate. Nonetheless, popularity is no guarantee of price appreciation – a point for speculators to reassess.

Down the stretch

The S&P 500 index is up 12% on the year, showcasing that despite outflow in equity markets, finding returns is attractive. Fragile conditions in the credit and banking sectors persist, and the system at times feels clogged. In recent months, investors have realized the attractive risk-reward in US financial services even beyond housing. According to Factset: “two of the stocks that received the most interest [from the largest 50 hedge funds] during the quarter included AIG and Capital One Financial Corp.” (November 19, 2012). There is momentum that favors a continuation of a collective rise in key asset prices for now. Of course, companies are lowering earning guidance and sustaining the recent run is not an easy task when skepticism keeps building. Nonetheless, the months ahead will provide more clues while potential short-lived shocks can provide evidence on investors’ resilience.

Article Quotes:

“According to projections by HSBC, in six years’ time the United States will be more dependent on imports from Mexico than from any other country. Soon ‘Hecho en México’ will become more familiar to Americans than “Made in China.”… Mexican businesses have been fighting with one hand tied behind their backs, thanks to a chronic credit drought. Lending is equivalent to 26% of GDP, compared with 61% in Brazil and 71% in Chile. The drought started with the “tequila crisis” of 1994, when a currency devaluation triggered the collapse of the country’s loosely regulated banking system. Banks spent the best part of a decade dealing with their dodgy legacy assets and were nervous about making new loans. Mexico has been one of the world’s ten biggest oil producers. The revenues of Pemex, the state-run oil and gas monopoly, provide about a third of the government’s income.” (The Economist, November 24, 2012)

“Britain's biggest pension funds have delivered deplorable performance over the past decade. New research, seen exclusively by The Telegraph, shows that 14 of the 20 biggest actively managed pension funds delivered below-average returns over this period. In total more than £62bn of retirement savings is invested in these funds. Just three of the UK's largest funds (managed by Standard Life, Zurich and Windsor Life) delivered a decent return for investors, while another three – which have a further £21.5bn invested in them – beat the average fund in their sector only by a whisker. The underperforming pensions are managed by some of Britain's largest insurers and banks, including Aviva, Scottish Widows, Lloyds, Scottish Equitable, Friends Life and Barclays. … Philippa Gee, who runs her own advisory firm, said many people pointed out that passive tracker funds were "guaranteed to underperform" because they simply returned what the market did, minus charges. Philppa stated:  ‘Fund managers have no encouragement to outperform as this would involve taking a high risk, which may not fit comfortably with the investment style of the fund in question, and they have no push from investors to perform, as the money will stay there whatever the return delivered.’ This is because the banks, salesmen and advisers who sold these pensions in the first place are, on the whole, no longer reviewing them – although some will still be collecting an annual commission payment on the back of the sale.” (The Telegraph, November 25, 2012).

Levels:

S&P 500 Index [1409.15] – Climbing back above its 200-day moving average. Attempting to stabilize around 1400.

Crude [$88.28] – Narrow range forming between $85-89 in recent trading days. Like most risky assets, crude is overcoming a multi-week decline that began in mid-September 2012.

Gold [$1734.50] – Heavy resistance at $1800 points to a noteworthy trend that catches the eyes of gold aficionados.

DXY – US Dollar Index [80.19] – Another short-lived upside move. A shift back to risky assets is most likely to cause further dollar weakness.

US 10 Year Treasury Yields [1.68%] – Since the announcement of QE3, yields are trading between 1.60-1.80% – nearly in line with their 50-day moving average of 1.70%.

http://markettakers.blogspot.com

Dear Readers:

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed

Market Outlook | November 19, 2012

“Most quarrels amplify a misunderstanding.” (Andre Gide 1869-1951)

Collective pause

Digesting the market slowdown since autumn stirs mixed reactions and a desperate aim for clarity, as well. The catalysts of global stock market sell-offs range from various triggers such as weakness in corporate earnings, the slowing pace of a three-year bull market and some blurry responses to quantitative easing III. The combination of these factors alone would have been enough to cause a pause way before election results and the over-obsessive focus on “fiscal cliff” matters. Taking a look at the macro picture in the context of the business cycles is the puzzle that faces participants. At the same time, economic recovery, from a pickup in housing to positive signs in the GDP, requires further confirmation.

Gauging moods

Interestingly, a peak in risky assets also accompanies the stock market sell-off. The mid-September period triggered a peak in crude prices, decline in US Treasury yields and a mild strength in the US dollar. Perhaps it’s not a stretch to state that September 14, 2012 marked a vital macroeconomic day around the announcement of open-ended quantitative easing. Surely, beyond the political banter and never-ending European concerns, the Federal Reserve’s stimulus efforts remain controversial. Overall consensus expects this low-rate environment to continue for the next two to four years (according to a recent CFA poll). It remains unclear on the end of the low-rate policy; there is a debate that’s brewing within the Federal Reserve. A myriad of speculations will linger, but the stimulus efforts are viewed with increasing skepticism, especially by larger money managers. Perhaps, the Federal Reserve’s implementation of quantitative easing III may be too early to judge for now.

Growth search

Despite the negative climate generated by the self-fulfilling risk-aversion, the volatility index remains steady thus far. At least, the volatility index has not witnessed a dramatic spike that signals an all-out turmoil. Sure, the consecutive down days in equity markets are known easily to cause an emotional response, but that’s to be expected. Yet, the investor demand for growth themes and/or higher yielding returns remains in place regardless of accumulating noise that surrounds macro flux. The shift away from risky assets has been visible for several weeks, but there is no clarity on its longer-term impact. Interestingly, the less-than-stellar earnings have one positive angle for those desperately seeking good news. According to Bespoke Investment Group: “For the first time in three quarters, more than 60% of companies beat earnings estimates. This season, 60.1% of the 2,158 US companies that reported beat consensus analyst EPS estimates. While not great, at least it's a quarter-over-quarter increase.” (November 16, 2012).

In looking ahead to the first quarter of 2013, investors appear to shift their hopes for an emerging market recovery that can restore collective growth rates to desired levels. After all, the developing market is known to provide relative safety (at lower yields) rather than impressive expected growth rates in developing markets. However, resuming last decade’s trend of extraordinary growth is challenging for China and other nations. Similarly, the relative strength of the US market has been an appealing story for a while given the growing momentum. This creates a quarrel for money managers seeking to deploy capital. For now, global markets remain inter-connected, which in turn enhances the difficulty for money managers.

Article Quotes:

“Most of the weakness in state and local governments’ purchases apart from their spending on construction can be traced to a below-average rebound in tax revenues and the need to balance general-fund budgets, but additional pressure came from below-average growth in federal grants. The American Recovery and Reinvestment Act of 2009 (ARRA) authorized an increase in federal grants to states and localities through 2011; those grants helped support state and local purchases for a while, including in the final months of the recession, by raising the amount of assistance to states and localities above what it would have been otherwise. However, the winding down, beginning in 2011, of payments from that increase in federal grants was most likely a drag on the rate of growth of state and local governments’ purchases last year and in the first half of this year. In contrast, state and local governments’ construction spending was probably held back primarily by general budgetary pressures and by tight credit markets early in the recovery, because federal grants for capital projects in the current recovery have been in line with those during previous recoveries since 1959.” (Congressional Budget Office, November 2012).

“As Beijing is continuously prodded to distinguish its policies and engagements from that of the West in Africa, ‘image’ is of paramount importance. For China, keeping a carefully managed image in Africa will be critical to undercutting the arguments of neo-colonialism that are levied by its critics. The policy of non-interference has always been Beijing’s welcome answer to queries about its self-centered policy and economic gains in Africa. As the initial honeymoon is far spent with multitudes of Chinese businesses descending onto African soil, sections of African populations disagree with the image of China as a non-meddling altruistic partner; hence the display of recent anti-Chinese sentiments in places like Zambia and Sudan, and the increasing deportation of Chinese from countries like Angola, Ghana and Nigeria. To deal with these growing pains in Sino-African relations, and chart a different path from that of the West in Africa, Beijing has an inconceivable task of being both a responsible power that commends and chastises as well as a respectful partner that brandishes the policy of ‘no domestic interference.’ In maintaining this precarious balance, non-interference becomes a mirage since an increase in Chinese economic investments might come with temptations to help shape and sustain the requisite business environment needed for these investments to flourish. Finally, Beijing is currently dealing with a new generation of African leadership that is under pressure to embrace liberal democratic ideals and pragmatic economic agenda. Even though persistently described as a façade by the West, non-interference has variedly won the hearts of some African leaders who perceived it as a much-needed break from the quid pro quo relations with the West.” (The Diplomat, October 25, 2012).

Levels:
S&P 500 Index [1359.88] – Remains in a downtrend. Breaking below $1420, which set off further deceleration.

Crude [$86.07] – Bottoming process developing around $86. After a 16% decline, we will get a better idea of the buyers’ conviction and enthusiasm.

Gold [$1713.50] – The struggle continues to surpass $1800. A very early sign of deceleration is shaping up. However, gold’s behavior relative to other commodities showcases further strength.

DXY – US Dollar Index [81.25] – No major acceleration, but the decline in dollars’ value has stopped and is showing signs of turning the corner.

US 10 Year Treasury Yields [1.58%] – The four-month swing between 1.80-1.55% remains in place. Now the low end of this range showcases recent risk-aversion. Recent patterns suggest high odds of rising yields, as a move below 1.47% can enhance the deceleration.




http://markettakers.blogspot.com


Dear Readers:

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed

Market Outlook | November 12, 2012

‘Man maintains his balance, poise, and sense of security only as he is moving forward.’ Maxwell Maltz (1927-2003)

Rebuilding

Elections marked a close to one big picture suspense while policymakers’ decision is being mildly confronted. Surely, tax implication and sustainability of the current recovery creates a speculative and potential edginess for those assessing risk. In terms of sentiment, excessive worries remains contained for a while since last summer and emotional responses are inevitable. We are entering a stretch that requires patience for investors in Europe and other emerging markets as well. The possibility of a collective recovery for an inter-connected markets is setting up as myriads of clues surface between now and year-end. This weekend observers noted that Chinese export surged by 11.6% reflecting a pick up in global trade. Perhaps, an early sign of positive movement in larger economies.

The U.S. economic recovery is slowly recognized while few have contemplated the odds of further recession ahead. Current pace of recovery showcases a visible strength in housing.

‘Construction spending in September climbed to a nearly three-year high at an annualized rate of $852 billion, as increased spending on houses, apartments and private nonresidential projects outweighed a continuing downturn in public construction.’ (Associated General Contractors of America, November 1, 2012).

Next year pundits will reassess the impact of housing while the Federal Reserve guidance on mortgages will be attentively watched. Improving labor numbers are needed to support housing and overall growth. Thus far, recent month’s labor results have reshaped gloom and doomers to re-think the ugliest scenario.

Digesting retracements

Since mid-September US stock prices, as measured by broad indexes, have declined. A two month pause triggered around the announcement of QE3 and the decelerated price action as a result of slowing corporate earnings. Adjustment to new earnings expectations presents challenges for shareholders seeking to add further risk exposure. According to Factset: ‘only 40% of companies have reported sales above estimates. This percentage is well below the average of 55% recorded over the past four quarters.’ (Factset Insights, November 9, 2012). Interestingly, the resurgence in Europe and Emerging markets remains vital since larger U.S. companies rely in overseas markets for earnings growth.

Room for surprises

Thus far, any sings of domestic hope has yet to impress analysts such to produce cheerful projections. Instead common expert thought calls for a weaker outlook:

‘Economists expect the economy to grow at an annual rate of 1.8 percent in the current quarter, down from the previous estimate of 2.2 percent growth, according to the Philadelphia Federal Reserve's fourth-quarter survey of 39 forecasters.’ (Reuters, November 9, 2012).

This collective expectations presents some upside surprise in GDP numbers given analysts lowering their expectations. Perhaps, the fist half of 2013 is the next suspenseful period to assess the speed of current expansion.

The bullish argument today, in some ways is not as appealing (since stocks have rose significantly ) as March 2009 dismal lows. Yet, the hurdle of averting suspected sovereign risk both in U.S. and Europe can trigger further, but substantial optimism. Simultaneously, the economic recovery in the U.S. needs to pick up the pace in a favorable direction. Recent Midwest drought and Northeast storm will play a role in economic numbers for near-term observers. Nonetheless, the business cycle favors an economic recovery when isolating noise within the business cycles. Not to mention, recent pullbacks in S&P 500 Index were needed and relatively healthy to have a breather. In due time, investors will have the choice to revisit entry points in riskier assets.

Article Quotes:

‘ If past-year food price information is relevant for inflation expectations, then we expect respondents who, prior to receiving the selected information, are less informed about it to find the information more valuable and to be more responsive to it. Therefore, to gauge respondents’ familiarity with the selected information, we ask: ‘Over the last twelve months, by how much do you think the average prices of food and beverages in the U.S. have changed?’ The respondents who were randomly assigned to receive the selected information (the information group) were then informed that food/beverage price inflation in the U.S. had been 1.39 percent over the last twelve months, based on data from the Bureau of Labor Statistics. Respondents in the control group did not receive this information. We measure respondents’ ‘Perception Gap’ as the difference between the objective information value (1.39 percent) and respondents’ prior beliefs; a negative perception gap corresponds to overestimation of past food/beverage price inflation. We find that respondents have inaccurate perceptions of past changes in food and beverage prices. The average perception gap in our sample is -4.92 percentage points (meaning respondents report past food/beverage price inflation, on average, to be 6.31 percent). We find that nearly 40 percent of our respondents believe past-year food and beverage price inflation was 7 percent or more, when, in fact, the published measure has not risen as high as 7 percent since 1981.’ (Federal Reserve of New York, Nudging Inflation Expectations: An Experiment, November 5, 2012).

‘In recent weeks asset managers within Japan have scrapped plans to launch funds that had aimed to raise a combined Y67bn ($840m) to invest in shares in Shanghai, according to analysts at Lipper. In the latest monthly survey of individual investors by Nomura, Japan’s largest brokerage, the renminbi fell to an all-time low rating as investors were asked to select one currency as an ‘appealing’ investment target over a three-month timeframe. Since Tokyo nationalised a disputed chain of islands in the East China Sea in mid-September, Japanese businesses such as Shiseido, the cosmetics company, and watchmaker Citizen, have experienced steep falls in sales in China, as consumers in China steer clear of obviously Japanese branded goods. Now households in Japan are responding in kind, say analysts, by checking flows of investment into Chinese stocks, bonds and bank accounts…. The dispute ‘has cast a pall’ over Japan-based funds investing in China, said Yoshihiro Hamada, head of product development at Diam Asset Management in Tokyo, which has struggled since October to find Japanese banks and securities companies willing to market its Rmb94m ($15m) bond fund.” (Financial Times, November 11, 2012)

Levels:

S&P 500 Index [1379.85] – The downtrend since mid-September is in place. The index is slightly below 200 day moving average which catches the attention of technical observer.

Crude [$86.07] – Back to familiar range around $85-86, a level that has triggered upside moves twice in 2011 (February and October) and earlier this year.

Gold [$1738.25] – The near-term question lingers on the commodities ability to revisit and surpass $1800. A growing possibility given last weeks action.

DXY – US Dollar Index [81.05] – Since mid October, the dollar index is strengthening modestly. A reflection of slight risk adjustment, but not quite a big move to cause a trend shift.

US 10 Year Treasury Yields [1.60%] – Ongoing zig-zag between 1.80-1.60% continues. Now at the low end of the 3 month trend reinforcing the low rate theme.

http://markettakers.blogspot.com


Dear Readers:

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed

Market Outlook | November 5, 2012

“Suspense is worse than disappointment.” (Robert Burns 1759-1896)

Improvement acknowledged

The political suspense lurks in the background for financial markets that are in equal limbo. The anticipated election results can easily stir short-term movements in macro indicators. Yet, guessing the potential priorities of policymakers is a daunting task that will keep many speculating and re-adjusting for months ahead. Nonetheless, the analysis of the current conditions presents more encouraging signs than highlighted in the day-to-day chatter. Perhaps, the early indicators like the silent bull market are now being vividly felt in the real economy.

Meanwhile, the improving economic data points match the bottoming business cycle. Stability in housing and turnaround in labor numbers paint a favorable picture in the post-meltdown era. The S&P homebuilders index (XHB) is up more than 238% from its lows of March 2009, showcasing the revival in housing – or at least, investors’ conviction on further recovery when taking account of the current trends and influence of policy makers. On a similar point, the Federal Reserve of Cleveland reminds us of the following:

“A direct link between housing markets and employment is found in the construction of new homes. When home prices are rising, more households will find new homes to be a viable alternative to existing homes. Starts of single-family homes have increased 27 percent over the previous year, and multifamily housing starts are up 35 percent.” (Stephan Whitaker, October 30, 2012).

Breathers and adjustments

For more than three years, the bullish stock market run looked ahead to a recovery. In that period, shareholders were rewarded for betting heavily on continued earning growth. Now broad indexes are pausing, as the S&P 500 index cooled by 4% from its annual highs (the index is up 12.5% in 2012). Collectively, we are entering a deliberation period in which participants are balancing the earnings growth slowdown versus the lack of alternatives in other liquid investments. Importantly, there are vital periods where there is a disconnect between the pace of economic recovery and stock market movement.

The relative edge of US markets remains noteworthy, while emerging markets attempt to play catch-up. In this setup, seeking investment ideas in emerging markets is appealing in areas that are undervalued or neglected. Encouraging signs of Chinese recovery enhance the near-term curiosity for risk-takers. The recent expansion in Chinese manufacturing serves as an ongoing hint of a new phase of a recovery, but confirmation is long awaited as skepticism grows.

The interconnected nature of markets is biased for a collectively working financial system. Currently, there is increased demand for corporate debt in Europe, and emerging markets demonstrate desperation for yields among global investors. The element of additional surprises in Eurozone resolutions is poised to trigger further enthusiasm away from trepidation that has escalated in recent years. Already, early risk takers are cashing in, as illustrated in this example:

“London-based hedge fund Adelante Asset Management has made a 70 percent gain on a sale of Greek bonds, showing the potential for big profits from betting on a recovery in the fortunes of a country effectively off-limits to investors a few months ago.” (Ekathimerini.com, November 2, 2012).

Big-picture calmness

The contentious discussion of quantitative easing in the US remains a heated debate at times but is generally accepted by the market. For now, the short story suggests: Inflation expectations remain low and economic recovery is not overheating; therefore, low interest rates remain in place for an extended period. Meanwhile, the CRB index reminds us that commodity prices (as a collective unit) are down for the year, and the overall message is that escalating prices are not to be feared.. In addition, volatility has remained low and “fear-mongering” messages are not sparking sensitive reactions. Perhaps, there is a macro stability brewing when considering low rates, contained commodity pricing and relatively low volatility. The suspense may turn to fear when these macro factors adjust more than expected.

Article Quotes:

“For all my value investor friends’ faith in physical assets and commodities producers, those are much more open to confiscatory taxation or seizure than shares in companies that have shown an ability to retain long-term franchise value. If you own a gold mine in South Africa or an oil concession in Argentina, you have a target painted on your money’s back. There are always politically compelling arguments for your having obtained a mineral concession through an unfair or even illegal process. You can’t move the mine or the oil well, and they get to take it back when they want. Sovereigns can take a long time to pay partial compensation. From an equity owner or corporate bondholder’s point of view, the best long-term source of income is a durable international brand, or a corporate design or technology team that has shown an ability to replicate itself over generations. Think Hermes, or Volkswagen, or Schneider Electric. None of them sell what they did in 1960, but they have shown the ability to develop and expand their product lines over time. They’re not based on confiscatable oil wells or gold mines, and the international debt they support isn’t documented by reversible Presidential decrees. The credit investor is always living in fear of inflation and devaluation. Better to own the debt of someone who has to worry about their access to markets, and who has been forced to meet customers’ needs over time.” (Financial Times, John Dizard, November 4, 2012).

“The fact that China watchers, as well as influential political insiders, still cannot say with certainty which leaders – or even how many – will comprise the new lineup is a testament to how opaque and anachronistic the selection process is for the rulers of a rapidly modernizing nation playing an increasingly important role in the global marketplace. In that sense, no matter who walks out onto the rostrum at the Great Hall of the People when the next Politburo Standing Committee (PBSC) is introduced to the world, attention will quickly shift from the identity of the new leaders to whether they can successfully manage the many challenges facing the regime. How severe are those challenges, and what is the likelihood that the new leadership will see bold action on reform as the best – and perhaps the only – means for addressing them? A first step in answering these questions is to put the issues confronting the CCP, as well as the ferment over how best to address them, in their proper context. Chinese elites, and especially the intelligentsia, have a storied tradition of trying to shape the thinking of an incoming administration. Against this backdrop, the effervescence of the debate in recent weeks over reform and the CCP’s future is consistent with the atmosphere that always precedes a leadership turnover.” (Center for Strategic & International Studies, November 1, 2012)

Levels:

S&P 500 Index [1414.20] – Staying above 1400 for a sustainable period is a tough feat considering the peaks in 2000 and 2007. Yet, the momentum remains positive for now, despite increasing odds for pullbacks.

Crude [$84.86] – After a 30% drop from March-June 2012, oil prices are attempting to stabilize around the $85 range.

Gold [$1685.00] – For the fourth time since last September, gold has not demonstrated the ability to stay above or reach $1800. Recent declines make a case for a trading range closer to $1600.

DXY – US Dollar Index [80.59] – In line with the 200-day moving average, while slightly above annual lows.

US 10 Year Treasury Yields [1.71%] – Eclipsing 1.80% will surprise most, while staying below 2% for months ahead appears to match the consensus view.


Dear Readers:

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed

Market Outlook | October 29, 2012

“Our dilemma is that we hate change and love it at the same time; what we really want is for things to remain the same but get better.” (Sydney Harris, 1917-1986).

Quandary confronted

If the earning slowdown was not a concern in previous months, it has now certainly awakened those who inquired about the sustainability of corporate earning growth. The actual versus expected quarterly announcements can find a way to “beat” estimates, but confidence in solid growth for two quarters ahead is not that high.
“Only 36% of companies have reported sales above estimates. This percentage is well below the average of 55% recorded over the past four quarters. If 36% is the final percentage, it will tie the Q1 2009 quarter (36%) as the quarter with the lowest percentage of companies reporting sales above estimates in the past four years.” (Factset Insights, October 26, 2012).

In addition, expecting further fuel from an already explosive stock market may be asking too much. Some chartists and others traders are loudly proclaiming the increased odds for pullbacks that have persisted over a few days. A more rational perspective would expect a 5-10% pullback, but that’s not quite dramatic enough to label it a prelude to a doomsday setup.

Yet, the struggle for money managers resides in distinguishing rapid micro noise from sustainable macro trends. Silently, in the background, two surprise elements may await: 1) A recovering emerging market led by China 2) a Eurozone solution better than the worst-case scenario. Both factors are poised to either lessen the pending sell-offs or fuel a renewed acceleration. Either way, the surprise element serves as a wildcard in influencing investors’ mindsets.

Grasping constraints

In taking a breath or two, one quickly realizes the intriguing dynamics of the fixed income market. First, money managers are demanding higher yields given the low treasury returns. Secondly, there is a lack of high-quality fixed-income products that can produce attractive yields without enhanced risk. Thus, owning “safe assets” sounds appealing in turbulent periods, but an obsession with safety comes with opportunity costs, as well. Perhaps this is frustrating for analysts who were accustomed to expecting reliable returns in previous decades. Similarly, this is frightening to those who cannot overcome or ignore the 2008 debacle and other equity market glitches, which led most participants to flee the risk exposure of US stocks. These patterns are well documented, but the money management world is forced to think sharply, to work harder and enhance one’s ability to deliver a balanced and accurate view of risk. The adjustment to slower growth and the higher price for safety changes market dynamics beyond the textbook definition of risk management.

Balancing mix

Conflicting forces of sluggish corporate fundamentals ahead are somewhat offset by the lack of trustworthy alternatives to liquid investments – not to mention the fact that the lack of evidence of a major “bubble” in this current run makes it difficult to envision more than a 15% drop in broad stock indexes. At the same time, improvements in economic numbers hint of a much-needed turnaround for confidence restoration. Yet, layers of puzzles create unease, which simply makes risk takers rather edgy. That unease is felt by moderates and expected rise in volatility. On that note, the upcoming week will provide further hints and data points to ponder. Pending announcements range from various job reports to construction spending to updates on the Chinese Purchasing Manager Index (PMI). Surely, digesting these points in the context of the big-picture concerns can spark noticeable reactions and overreactions.

Article Quotes:

“The [Chinese] economy’s strong performance at the end of the third quarter was in fact fuelled by a jump in investment, illustrating that consumption is still far from strong enough to power growth on its own. Retail sales, the best indicator of overall consumption, have been resilient, rising 14.2 per cent year-on-year in September. However, that has not made up for a deep slump in housing construction. Fearing that growth was on the verge of slowing too much, the government did what it does best: it cranked up investment. The approach has been two-pronged. The National Development and Reform Commission, a powerful planning agency, has approved a series of large infrastructure projects since May. Meanwhile, the central bank has loosened monetary policy by cutting interest rates twice and injecting liquidity in money markets to ensure that these projects could obtain financing. The fruits of these efforts began to be harvested in September. Investment in railways surged 78 per cent year-on-year and investment on roads climbed 38 per cent. This mini-boom in investment, not the resilience of consumption, was the reason that so many analysts concluded that China might be at the end of its nearly two-year-long downturn. If infrastructure spending continues to surge, it is entirely possible that the healthy trend of the first three quarters will reverse in the final three months of the year, and investment could once again overtake consumption as the biggest contributor to Chinese growth.” (Financial Times, October 18, 2012).

“From an economic growth perspective, it appears that fiscal policy has already been tightened too much and has been a vital factor behind the sub-par recovery. The bottom line make-up of GDP over in the three years of recovery shows that private sector demand is expanding at a reasonable pace, no doubt aided by the record low level of interest rates. The problem for bottom line GDP growth has been, quite extraordinarily, the fact that government demand has cut GDP for eight of the last 10 quarters. Attempts to cut the budget deficit at the federal level and balance the budget at the state level is hurting economic growth and constraining job creation. Ed Dolan from EconoMonitor points out that the September quarter GDP outcome was a rare example in recent times where government demand contributed to GDP growth. Indeed, government demand contributed a hefty 0.7 percentage points of the 2.0 per cent GDP growth rate, but at Dolan notes, that boost to GDP “turns out to be almost entirely due to a big jump in federal national defence consumption expenditures … the contribution to GDP growth from state and local government was a pathetic 0.01 per cent of GDP.” (Business Spectator, October 29, 2012).

Levels:

S&P 500 Index [1411.94] – Several signs of selling pressure at 1460. Buyers’ conviction will be examined at 1400 following a multi-week breather.

Crude [$86.28] – Recent downtrend in place after peaking at $100. No early sings of bottoming around $85 range at this point.

Gold [$1737.00] – Further evidence of sellers’ momentum at $1750, showcasing the run-up is pausing. However, the multi-year uptrend is not affected.

DXY – US Dollar Index [80.04] – Remains in a trading range over a two-month period. A long-awaited bottoming process may take place, but movements remain limited.

US 10 Year Treasury Yields [1.74%] – Trading closer to three-month highs of 1.82%. In mid-August and September, yields couldn’t surpass 1.90%. Increasing odds of that trend repeating this month, as well.

Dear Readers:

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed

Market Outlook | October 22, 2012

“Power is so characteristically calm, that calmness in itself has the aspect of strength.” (Edward Bulwer-Lytton 1803-1873).

Composure required

Heading into this quarterly earning season, the ongoing question regarding corporate earnings’ sustainability was being asked with heightened curiosity. There already exists a jittery setup for stock prices, given an explosive multi-year upside run. At the same time, the debate over economic recovery resurfaces, given improving housing and consumer data. Yet, a slightly recovering economy might be easily confused with an extended stock market, but those assumptions are often costly and overly simplistic. Sustaining revenues for larger companies is surely a challenge, but that doesn’t ensure that the stock market appreciation is coming to a crisis mode, either.

Friday's stock market sell-offs captured recent disappointments in company earnings matching or exceeding expectations. Some earnings results reflected a cumulative impact of the slowdown in China and Europe that strongly influence multinational revenues. As anticipated, the inevitable slowdown from all-time highs in corporate earnings is more than reasonable. Similarly, the odds of pullbacks were much anticipated. As Bespoke Investment reminds us: “The Dow's 1.52% drop today [Friday October, 20] ended a streak of 81 trading days without a 1%+ decline. This was the longest streak without a 1%+ decline since the 94-trading day streak that occurred from July through November of 2006.”This was an amazing streak that showcases strength that’s been overlooked by most.

Lack of options

Plus, with interest rates this low, one has to wonder: What other alternatives present an attractive risk/reward? At this point, not many assets offer a liquid alterative. Thus, equities have not quite lost their relative luster despite ongoing fund outflows. Not to mention, even a 5-10% correction in broad indexes may not materially impact the current recovery mode. Sure, the growing list of bearish arguments of fragile markets is ready to unleash now. This paints the missed earnings targets as a clue for further doom. Yet, overreacting to these exhausted worries is as reckless as ignoring the earnings slowdown that has slowly persisted. Maintaining balance is the challenge for money managers for the next two or three quarters ahead.

Brewing suspense

Global growth and inflation are ongoing concerns that are pointed out by executives, investors and pundits. The recovery of emerging markets is not rapid but poised to resume. Thus, the recent correction was much needed and despite slower growth than last decade, there is strength in emerging markets that may be underappreciated. “Today, emerging market countries are the main driver of global growth. Emerging market economies will account for more than 70 per cent of the contribution to global growth in 2012 and are growing at a pace four times that of developed market economies.” (FundWeb, October 22, 2012). Inflation remains another debatable topic in terms of reported versus unofficial data. For now, inflation is not overly concerning. Growth is the bigger concern, as the economy is not close to “overheating.” Yet, passionate arguments and interpretation can shape investor mindsets.

In 2010 and 2011, volatility spiked to extreme levels (above 40s on VIX index). Perhaps, a similar pattern was anticipated this year, but in late October the calmness remains in place. Of course, there are market-moving events that can spark sudden turbulence – a thought circulating among financial professionals this weekend. Importantly, risk-aversion has been a dominant theme that has persisted during strong markets. Thus, claims that the rush to safety is a new phenomenon after weak earnings might be misleading. For now, emotional responses may play out, but overreacting to headlines is not a rewarding proposition.

Article Quotes:

“But there is a difference between expecting low returns due to reversion to long-term normal valuations and expecting low returns because something has fundamentally changed about the return-generating process for equities. Whether GDP growth in the U.S. and other developed economies is going to be slower in the future is not, in and of itself, a reason to expect a lower return to equities. Likewise, the fact that historic equity returns have been higher than GDP does not mean that the equity market has been some sort of long-term Ponzi scheme. Equities are an ugly asset class –one that is more likely than almost any other to lose investors a significant amount of money at those times when they can least afford it. That is, in a way, their charm. It is why equity is such an appealing form of capital for companies. It is the reason why equities have been priced to deliver good returns historically. And it is the reason why we believe equities are very likely to be priced to deliver strong returns into the indefinite future.” (GMO, White Paper August 2012)

“One possibility is that central banks are overestimating the scale of economic weakness, and keeping interest rates too low as a result. That might be good for corporate profits, but excessively loose monetary policy would also lead to higher inflation. So how are equity markets affected by inflation? In years when the annual inflation rate has been falling, the real return from American stocks has been 9.6%; in years when it has been rising, the real return has been minus 1.1%. So past experience suggests a sudden jump in inflation would not be great for the stock market. The other possibility is that central banks have not done enough: monetary policy is still too tight. In that case, the economy will be even weaker than is currently expected and profits will presumably be lower than forecast. It is hard to see how that scenario can be very bullish for equities either. Perhaps none of this would matter if the bad news was already reflected in share prices.” (The Economist, October 20, 2012)



Levels:

S&P 500 Index [1433.19] –Staying above 1400 seemed short-lived earlier this year (with a peak of 1422). Now, the 1420 level attracts some eager observers and any movement below 1400 can re-spark further sell-off potential. Nonetheless, the upside remains intact.

Crude [$90.05] – There has been a nearly $10 drop since peaking on September 14, 2012. We see strong evidence of bottoming around $90 over several weeks.

Gold [$1737.00] – In recent weeks, gold has held in a tight range between $1740-$1780. Interestingly, getting over the hurdle of $1750 remains a challenge for goldbugs.

DXY – US Dollar Index [79.62] – Mostly unchanged week over week. The index is 13% higher from all-time lows of March 2008.

US 10 Year Treasury Yields [1.76%] – The challenge is to surpass the 1.80% mark, as that range is tested for the third time in the last three months.



Dear Readers:

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed

Market Outlook | October 15, 2012

“The quality of expectations determines the quality of our action.” (A. Godin 1880-1938)

Reevaluating strength

The ongoing but subdued bullish stock cycle is constantly tested with familiar big-picture concerns. At this point, the fear-driven questions are tiresome but almost nothing new for this resilient market. The current wave of concerns is focused on companies’ ability to sustain the earning growth. A quick browse across traditional financial articles will quickly remind us that this earnings season is expected to underperform or set up to disappoint. This somewhat implies an intense and decisive outcome for risk managers who are now deeply digging in the third quarter earnings results. Certainly, this usually comes down to a game of meeting expectations. Perhaps, the emphasis is tilted toward shorter-term outcomes and can mislead the more patient investors.

Momentum vs. Fear

On one hand, improving labor and housing results showcase restoration out of fragile conditions. Interestingly, number crunchers and analytically minded economists are grappling with the bottoming process of a sluggish economy. In a subtle manner, there is momentum that’s building from jobless claims that were low and closer to numbers seen before the 2008 crisis. Similarly, consumer confidence (University of Michigan), hit a five-year high. Economic data is slowly catching up with established bullish stock markets. The evidence of growth is slowly piling up month after month for those willing to dig a bit deeper.

Banks are reshaping and strengthening their books, the US energy sector remains strong and other innovation-driven themes present a closer look. Sure, skepticism is healthy and needed. Nonetheless, data has pointed to the US edge in leading out of this recovery, regardless of directional debates.

Conversely, there is another school of thought. After the stock market run-up over three years, it may appear difficult to ignite additional enthusiasm. Thus, if the housing and labor recovery is confirmed further then the upside catalysts may face some limitations. It’s a legitimate concern that’s plaguing those who’ve increased risk exposure to risky assets. Plus, the element of waiting for another stimulus via quantitative easing is now less of an option. If further easing is not in sight, then many ask: Can the markets sustain its strength? This is a noteworthy but multifaceted point that lacks directional clarity.

Deliberating

In considering both set-ups, there is a disconnect between stock behavior, general economic performance and investor sentiment. Grasping this chaotic and not-always-logical message is more of an art than science. It is a statement and observation that many would not like to admit or decipher. As a start, when viewing the trading activity relative to last September (2011), one can make the case for low appetite for equity market participation:

“The New York Stock Exchange is off 30.9% from a year ago, at 1.2 billion shares. Its NYSE Arca and NYSE MKT exchanges are off 49.3%, to 219.0 million shares, according to SIFMA” (Traders Magazine, October 12, 2012).

Despite the low volume, the market strength has accelerated as a new cycle has formed since March 2009. In the near-term, there are few noises to settle. Heightened “uncertainty” has felt like the norm for a while, but a consensus view continues to anticipate turbulence in the months ahead. Of course, election results can provide some “clarity” for years ahead. Then there are the macro factors that have bombarded market participants, such as a Euro zone solution, slowdown in emerging markets and other thoughts related to escalating commodities prices. For now, digesting valuable data points is the key before making claims of changes in trends.

Article Quotes:

“The number of homes for sale has fallen back to its long-term average of 2m. Yes, there is a larger “shadow inventory” of homes that are in foreclosure or carry delinquent or defaulted mortgages. However, many of these are distressed, in that they have not been physically maintained. This means that the supply has become two-tiered – quality homes and distressed homes. For most buyers, only the first of these two markets is relevant and the supply there is approaching its lowest level since 1992. According to JP Morgan, this rate was steady at about 1.4m annually from 1958 up to 2007. But, it plunged below 500,000 for the three years following the financial crisis, as young people moved in together or lived with parents. Now it has doubled from that level and estimates of pent-up households are at an all-time high. Most expect formation rates to rise much further still, exceeding the 50-year average for a few years.” (American Enterprise Institute, October 14, 2012).

“Blue-chip issuers such as AT&T, JPMorgan Chase and ExxonMobil will increasingly be vying for investor attention against the likes of América Móvil of Mexico, Banco do Brasil or Petrobras of Brazil and a host of other emerging markets companies. Dollar-denominated investment grade bonds from foreign issuers, known on Wall Street as ‘Yankee’ bonds, now account for about 40 per cent of all issuance by value and the figure will top 50 per cent by 2015. Three of the five largest investment grade bond issues in the US this year have come from foreign-owned companies, and American investors’ search for higher-yielding assets has encouraged issuers from Latin America and Asia to raise money in the US. High quality global journalism requires investment. … Investment-grade Yankee issuance has hit $330bn so far in 2012, according to Dealogic, putting it on course for the biggest year to date. Yankees accounted for 15 per cent of overall issuance in 2002, and have risen to average about 40 per cent for the past three years. UK borrowers remain the largest foreign issuers of US debt.” (Financial Times, October 14, 2012)



Levels:

S&P 500 Index [1428.59] – Following a 16% run from June to September, the start of this month has led to a pause. The index closed almost exactly at its 50-day moving average. A slight decline from annual highs of 1470 might stir early pullback concerns.

Crude [$91.86] – For more than two years, the trading range has formed between $84-$98. Now the price is stuck in between the common range, showcasing a lack of momentum.

Gold [$1766.75] – A step back reminds us that surpassing $1800 has been challenging for more than 12 months. The near-term focus is on the commodity’s ability to stir buyer demand at $1750.

DXY – US Dollar Index [79.66] – Unlike the summer months, staying above 80 remains a challenge. Yet, no noteworthy move will be seen in the near-term.

US 10 Year Treasury Yields [1.65%] –Like the currency, range-bound patterns persist. Since May, the trend reinforces a steady movement below 1.80%.


Dear Readers:

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed

Market Outlook | October 8, 2012

“Vision is the art of seeing what is invisible to others.” (Jonathan Swift 1667-1745)

Re-confirming strength

The existing bull market continues its run while the US economy appears to reaffirm its slow recovery. Central banks’ implementation of stimulus plans may have accumulated enough doubters, but the success of raising inflation expectations is still questionable, so the tone has led to assets seeing a collective boost. Housing improvement has been long underestimated and its contribution to the GDP can create surprises in the quarters ahead. Confirmation of construction and manufacturing growth will be watched attentively to see if there is an actual broad-based recovery. At this point, as in prior decades, the US manufacturing sector is sluggish, but even minor improvement can contribute to further evidence of new cycle recovery.

The desired pace of the current recovery is debated in many ways, but the clues of a housing healing should not be easily ignored. A recent status update on homeowners’ condition provided some early clues:

“According to the scorecard homeowner equity has risen to its highest level since the third quarter of 2008 and 1.3 million borrowers have been lifted above water, largely due to rising home prices. Equity jumped $406 billion or 5.9 percent to $7,275 billion in the second quarter of 2012.” (Mortgage News Daily, October 5, 2012)

Not too foggy:

These days, convincing the gloom-and-doom crowd with endless data of improving or cheery messages is not an overnight task. The same way, turning risk-averse observers into optimistic risk-takers ends up taking significant time. Yet, markets move faster than economic factors and select entry points are offered in a narrow period. The increasing confusion in data digestion, political messaging and residues of the 2008 crisis have puzzled many minds. Simply, casual and seasoned observers have been challenged by and at times missed this relentless “silent bull market.” Glancing at the scoreboard today (year to date: S&P 500 +16.2%, Nasdaq 100 +23.5%, German DAX Equities +25.4% and US Bank Index +30.5%) shows healthy return numbers by any equity-based historic standards. Perhaps, this reality is aggregating the trailing fund managers who failed to bet enough on US stocks.

Obviously, if the message of economic strength is not fully transmitted to wider audiences, then confidence restoration remains a lengthy process. Anticipation of Washington’s policy and elections outcomes further confuse many to stay stagnant:
“Almost 79 percent of respondents cited uncertainties related to the political environment as their number-one challenge.” (National Association of Manufactures, September 13, 2012).

Adjusting vision:

Similarly, the lack of stock market participation is hard to dismiss. Highly intensified and politically charged opinions on the economy are less relevant for markets. This year revealed the slowness of emerging markets, improvements in US labor and redefinition and restoration of a fragile global financial system. Interestingly, hedge funds are buying debt of risky European nations. According to Bloomberg, last month witnessed the $104 billion purchase of Spanish bonds by foreign investors (October 7, 2012). Perhaps, this shows risk-taking by few in anticipation of improving Eurozone solutions. This is a though reality to envision given what’s transpired in the last five years. Whether this is right or wrong is one issue, but acting on courage is what keeps the spirit of financial markets alive. Frankly, betting on upside surprises is out of favor and partially neglected.

As the mild race to own stocks piles up, then the grim question asked will be whether a strong economic recovery ends up slowing the stock market’s upside potential. Although economic strength is not fully evident, the trend is slightly positive. Yet the laundry list of worries has grown if not stayed the same from the start of the year. That includes: further discovery on Eurozone crisis, magnitude of China slowdown and escalating regional tensions leading to potential spike in commodities. The so-called “inventory” for worrisome matters continues to appear excessive more than was imaginable. For example, when it comes to buying downside insurance, last month presented heightened fear of all sorts:

“In September, average daily volume (ADV) in VIX futures reached a new all-time high of 126,345 contracts, which surpassed the previous record ADV of 102,587 contracts during June 2012.” (HedgeWeek, October 2, 2012).

Thus far, high trading activity in volatility-related products has not translated to increased volatility. Rather, the opposite result has been seen, in which volatility is not quite as high as expected.

That said, to claim a blind-sided collapse that may loom around the corner is not a shock (yet again). Rampant attempts to avoid or minimize misunderstood risk remain a theme, but riskless instruments are unattainable – reinforcing the importance of emphasizing relative attractiveness. For now, a slowing US economic recovery attempting to catch up with the explosive stock market only demonstrates a new cycle formation and a new definition of “normal.” The search for a “new normal” remains unknown to all.

Article Quotes:

“June or July is usually the peak month for both total and full time employment. This year the numbers broke last July’s level in April. The economy was a couple months ahead of schedule in affirming the uptrend in jobs. That uptrend is still firmly entrenched, even in the full time jobs including the September decline. The gains have clearly accelerated in 2012 versus 2011. The idea that the economy slowed in 2012 is hogwash. With QE3, the Fed is adding more fuel to a fire that was already beginning to burn hot. … The withholding tax data shown below also suggested that something in the labor picture is still undergoing consistent gains, regardless of what the SA [seasonally adjusted] data says. Increasing withholding tax collections of 2% in real terms are growing at double the rate of population growth. … Economic pundits must face the fact that the 10 million fake jobs spawned by the bubble are not coming back. The 7.8% unemployment rate is probably ‘normal.’ The bubble unemployment rate of 5.5% was abnormal.” (The Wall Street Examiner, October 5, 2012)

“Chinese leaders have plenty of cash, so they can easily funnel resources into new industries. They are already directing funding toward strategic emerging industries such as green technology products and next-generation information technology equipment and software. Where they run into trouble, however, is in actually getting those new industries off the ground. That requires turning off the spigots of government support flowing toward the older and more inefficient industries and state-owned enterprises, a tough task when local government officials are fighting hard to keep them alive. In green energy, for example, Chinese leaders have directed substantial resources toward wind and solar. That has paid off in clean energy manufacturing: Chinese companies are using cost innovations to manufacture cheaper versions of wind and solar technologies developed abroad, and they are exporting those products all over the world. What Chinese leaders really want, however, is to develop their own technologies and sell more of them at home, and that is not going so well. Chinese leaders are doling out funds for clean energy R&D, but they distribute them through government channels, and government officials direct the money toward old friends instead of new prospects. Resources go to the well-connected instead of to the entrepreneurial. Many private enterprises cannot get financing, and private enterprises are more likely to generate the new ideas China needs.” (Center for American Progress, October 2012).

Levels:

S&P 500 Index [1460.93] – Closed last week a few points away from September 14 highs of 1474.51. The current strong recovery began in early June as the odds for near-term correction increase.

Crude [$89.88] – Interestingly, after making annual highs along with stocks in mid-September, the momentum for oil has slowed sharply. A notable move below $90 is worth watching and deciphering between a trend and a temporary pause.

Gold [$1784.00] – Continues to trade near annual highs. Surpassing $1800 remains a suspenseful event for some buyers and a mere test of strength for most observers.

DXY – US Dollar Index [79.32] – In line with its four-year and two-points below its ten-year moving averages. Both demonstrate the lack of noteworthy movements and the relative stability of a strong currency.

US 10 Year Treasury Yields [1.74%] – It was September 30, 1981 when rates peaked, and ever since, the downside has persisted over three decades. Now, attempting to dig out off all-time lows set in July at 1.37%. Over a 10-week period, stability is forming between 1.60%-1.80%.


Dear Readers:

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed

Market Outlook | October 1, 2012

“The truest way to be deceived is to think oneself more knowing than others.” François de La Rochefoucauld ((1613-1680)

Seasonal deliberation

The four-year-cycle run in the stock markets mirrors the election season, which stirs up opinions and various thoughts. Interestingly, the fall season, including the month of October, is often feared, as pundits anticipate theatrical events. Certainly, sharp slowdowns have been displayed, most notably during the 2008 credit crisis and 1987 crash – not to mention most historians’ favorite: the 1929 crash resulting in the October panic ahead of the Depression. All sound quite familiar and rehashed in these cautious days and make for a thrilling documentary-like dialogue, but may not tell the full or exact story.

This financial market thus far has encountered various opinions, including some threats of gigantic regulations, or pending global collapse and lack of trust leading to a revisit of recent crises. Certainly, there is plenty that’s unsolved, but knowing where to focus one’s fear is the art that’s rewarding in this faster-paced market. Surely, noise and headline makers are eager for dull or theatrical events. Meanwhile, capital allocators have been punished for lagging broad indexes and simply cannot afford to live by popular or generic ideas. As the schedule has it, this week’s election-related events, along with early releases on labor conditions, combine to spark some talking points. In addition, further central bank and economic growth matters are awaited. Through all various data points, the impact to long-term implications will still remain a mystery to most.

Shaky feelings

This year has been more about accepting the slowing global growth and a collective recognition of various demographic and globalization challenges. At this point, one has to wonder how much ‘bad news’ remains in the tank for a market that has quietly risen while silencing various critics. According to the AAII investor sentiment data, the bearish reading is at a nine-month highs. Thus, it’s fair to assume that bubble-like levels regarding corporate growth are not overly concerning. It’s intriguing that the lack of enthusiasm continues despite the impressive year-to-date stock market returns. Simply, there is no shortage of doubters. Interestingly, other perceived “safe assets” persist in showcasing euphoric investor demand, such as Long US treasury and high-yield bonds.

For now, the appealing trade for broader audiences is to expect commodities to go higher. That's quite evident in speculators of crude that have increased their bets. Similarly, bank analysts have increased gold price estimates and the collective upbeat expert view lives on. Certainly, going against these forces is not easy and not natural to dismiss. Nonetheless, the risk of owning commodities has increased relative to other years, while the upside potential is unclear.

The Macro Reminders

The overly exhausted but never-ending Eurozone discussion may provide some jolt for volatility traders and some ammunition for those heavily entrenched in glooms-day scenarios. The fifth year of the Euro Crisis has rotated its focus between various countries, as Spain seeks a rescue plan. As the Spanish banks hold a $76.3 billion deficit (according to Bloomberg), the uncertainty cannot dissipate overnight as new discoveries unfold. Yet, the shock element is hardly news for a forward-looking market. Distinguishing social and political noise from market behavior remains the ultimate challenge in assessing Eurozone matters.

Finally, in the near-term, the impact of Middle East tension on oil prices and ongoing weaker Chinese growth (low PMI September data) will stimulate various minds to make strategic macro moves. Importantly, the link between oil demand and emerging market growth/slowdown is a puzzle that’s due for unlocking. Similarly, emerging markets are expected to reignite themselves out of the current slump, as demand for growth is desperately needed. Since 2010, the Emerging Market Fund (EEM) has underperformed compared to the S&P 500 index. This reinforces that the US banks, currency and financial system maintain their relative edge despite increased global uncertainty.

Article Quotes:

“The demand side is also dark and threatening for overpriced oil, very threatening. World oil demand, this year, may achieve a scary feat for the oil bulls: two straight years of near perfect stagnation of global demand. The EU27 countries are now in their sixth straight year of oil demand shrinkage, recession aiding, but they are now far from the only countries where oil demand shrinks – and shrinks. …. China's long-term growth rate of oil imports, which hit an average of more than 9 percent a year for 1999-2009 has been slashed in half. Indian oil demand growth, these days, is close to 3.5 percent per year, not the previous 5.5 percent average…. The US is now a large, ever growing net exporter of refined oil products. Domestic refiners are taking crude from wherever available and turning it into diesel, gasoline and other oil products for growing demand from Latin America, Asia, Africa and even Europe, where Europe's outdated, high cost, oversupplied and mismatched refinery output – relative to European refined product demand – creates a growing market for US exports.” (The Market Oracle, Andrew McKillop September 30, 2012)


“Jens Weidmann, president of the Bundesbank, last week said a banking union was a disguised transfer mechanism. On this point, he is right. A banking union would recapitalise Spanish banks at the expense of northern European taxpayers. This is the whole point of having it. It would be dishonest to deny that. A banking union, properly constructed, thus constitutes a fiscal union. This is not something you do before Christmas, or through a directive. I wrote earlier that a banking union is an even bigger deal than a eurozone bond. You can construct a eurozone bond with lots of safeguards. There are even proposals on the table that would turn a eurozone bond into an instrument to deliver austerity – a so-called debt redemption bond. I would rather have a banking union and no eurobonds, than the other way round. I would rather have nothing than a debt redemption bond. Judging from the political debate, Germany is not ready for a fiscal transfer mechanism of any kind. In particular, Germany is not ready for a banking union. Ms. Merkel never made a political case for a banking union in Germany. All she did was play down the implications. I would counsel readers against falling into the trap of thinking that next year’s German elections will miraculously clear all the hurdles. All the various probable outcomes favour a continuation of the present policy.” (Financial Times, Wolfgang Münchau Septmber 30, 2012)

Levels:


S&P 500 Index [1440.67] – Slightly retracing from intra-day highs of 1474.51. Increasing expectation for declines closer to 1400-1350. However, positive momentum remains intact. Since the lows of October 7, 2011, the index has risen by 34%.

Crude [$92.19] –Recent sharp declines are puzzling those expecting price appreciation due to some regional unrest. Interestingly, there is a record number of speculators who continue to bet on higher prices showcasing the already built-up expectations. At the same time, the slight decline below the 50- and 200-day moving averages are compelling to chartists who may make the case for further weakness. Holding above $90 will remain key for sensitive observers in days ahead.

Gold [$1776.00] – Growing suspense on gold’s ability to break above $1800 on the way to record highs will be tested yet again. Recent four-month upward movements have re-ignited confidence for analysts to increase targets while downplaying concerns of “bubbles”. Either way, hardly a fundamental play that’s heavily tilted toward momentum and increased speculation.

DXY – US Dollar Index [79.32] – Amazingly, the 12-month average stands at 79.91 and the four-year average stood at 79.25, which reminds us of the lack of any major changes.

US 10 Year Treasury Yields [1.63%] – In the last two months, struggling to hurdle past 1.80%, while showing resilience around 1.60%. Until there is a movement below or above this trend, the message remains that yields are very close to historic lows.


http://markettakers.blogspot.com

Dear Readers:

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed

Market Outlook | September 24, 2012

"Silence is a source of great strength." Lao Tzu, (600 B.C. – 531 B.C.)

A silent bull market

The much-anticipated announcement of further easing came and went mostly as expected. With this Quantitative Easing (QE3) announcement, the theme of synchronized uplift in all assets reminds us of 2007, or pre-crisis mode. It is fair to say that this summer, key markets were not quite caught up in the grim conditions of market hopelessness as experienced in late 2008. Neither did the Federal Reserve’s recent action feel like a desperate shock to get out of "intensive care" like the dull late winter of 2009. Yet, through all this repair and these confidence restoration attempts, it simply feels like a silent but powerful bull market. Amazingly enough, even the German stock market (DAX) is already up 26% in 2012. Not many openly glorify the recent market success. Perhaps, many are hesitant to fully relinquish the fearful mindset that’s commonly driven by too many unknowns. That said, de-leveraging is not so pleasant and restoring employment in the current landscape is not easy, but in many ways the market has explored and examined doomsday scenarios.

Growth in private sector jobs has been increasing slowly, corporate earnings are closer to all-time high levels and housing appears to be digging out of a deep ditch. All three fundamental points have backed this strong equity market that is looking ahead or at least for signs that indicate the stopping of the ongoing bleeding. For example, “A lack of inventory in the low-price segment of the market meant the average price of a home was up just because there were fewer low-priced homes in the mix. Adjusting for price, existing home sales were up a more impressive 16%, which is more in line with the growth we are seeing in new home sales.” (Morningstar, Robert Johnson, September 22, 2012). The expectation for continuously improving numbers is slowly building, which only enhances further sensitive responses.

Underestimated

Surely, when the thought of the S&P 500 index revisiting 2007 highs while Nasdaq hovers near its 12-year highs occurs, then it naturally stirs a knee-jerk reaction of a market that’s accelerating too quickly. It is understandable, but not necessarily wise, to take “overbought” statements at face value. Investment managers and participants are set to quarrel between the “gut feel” of day-to-day observation versus a mechanical but familiar set of circumstances that supports higher stock indexes

Through this upside move, there are instances of reality check that lead to a blurry vision when dissecting the testy social and foreign policy environment ahead of election season. Excessive diversion into these not-so-pretty but contentious social dynamics may have led some professionals to lose focus on trends and macro catalysts. Plus, the lack of clarity in regulatory policies and banks’ new revenue models enhance the list of uncertain items. Nonetheless, that’s not enough to depress a dynamic and evolving financial market.

First, it has become too common for politicians or pundits to bash the Federal Reserve’s actions these days. Secondly, there has been a growing fear movement that has led investors to purchase downside protection (insurance) in portfolio holdings. This is exhibited in various ways, as this summary showcases: “The CBOE saw more than 600,000 VIX contracts traded on Friday [September 14, 2012] for open interest of 7.66m, of which more than two-thirds represented calls, indicating that investors are positioning for volatility to increase in the near term.” (IFR Asia, September 23, 2012). Thirdly, the lack of retail investor participation is noteworthy and not needed to produce a solid year-to-date return. Interestingly, the majority of hedge fund managers did not participate or show strong convictions in the rally. At the end of August, when the S&P 500 index returned nearly 12%, hedge funds only produced 3.8% (Hennessey Group LLC). This is not overly alarming for longtime mutual fund observers who’re accustomed to underperformance by overhyped or larger managers. Similarly, few money managers may increase overall risk tolerance to chasing returns by accumulating winning stocks. That response potentially fuels further market upside movement (fairly or unfairly), especially if the real economy improves at least psychologically. Sure, pending pullbacks resurface here, but the positive momentum is hard to debate or ignore.
Suspenseful questions

Now that the anticipation of further central bank easing is nearly off the table, then what’s the next upside catalyst? It’s a question that’s being asked and an answer that will not be clear in the near-term. Are expectations going to escalate too high? And if the stimulus fails to produce growth, then what are the options and consequences?

These are all valid questions that will play out. Certainty, the Federal Reserve plan is now quite evident to decrease the suspense. The results of US elections and pending results from Eurzone solutions clearly will set the stage. Not to be missed in all headline-sensitive items is the potential resurgence of emerging markets, which contribute significantly to sales of larger multi-national firms. If the interconnected market operates in a coordinated recovery, then a collective strength may re-emerge. Any movement of collective strength can spark a much louder bull market as the odds for this are still underestimated.

Article Quotes:

“Americans have profited from China’s meteoric rise: China holds $1.15 trillion of the roughly $16 trillion total in federal debt, enabling deficit-popping tax cuts and government expenditures on social programs and the military. Nearly 160,000 Chinese students attended American universities last year, a 398 percent increase over the past 15 years, according to the Institute of International Education. Chinese firms invested more than $4.5 billion directly into the United States in each of the previous two years, through either mergers or opening new factories, according to the Rhodium Group. More than 1 million Chinese tourists came to the United States last year – each spending an average of about $6,500. The Commerce Department estimates 3.25 million Chinese will visit in 2016.” (The Fiscal Times, September 21, 2012)

“Much that could have gone wrong in the euro zone suddenly seems to be going right. Germany’s constitutional court in Karlsruhe has given the go-ahead for a new rescue fund. A banking union is taking shape. The ever-awkward Dutch have swung back to pro-EU mainstream parties in this week’s election. This builds on a recent pledge from the European Central Bank (ECB) to act to stop the break-up of the currency. Even angry talk of expelling the Greeks from the euro has died down. But don’t rejoice quite yet. The fine print of the Karlsruhe judgment may yet cause problems. Even Dutch centrists are wary of handing over cash and sovereignty. Nobody yet knows how to defuse the ticking bomb of Greece. The ECB’s commitment is untested. And nobody yet knows whether and when Spain will accept the offer of ECB help. Then there is the danger of complacency: debtor states might slow down reforms; creditors may lose the will to repair the euro’s fatal flaws.” (The Economist, September 15, 2012)

Levels:

S&P 500 Index [1465.77] – Trading at annual and multi-year highs while 7% above its 200-day moving average. Recent break above 1420 showcases some buyers’ appetite despite pending pullbacks.

Crude [$92.89] – Sharp near-term decline triggered after reaching the $100 level on September 14, 2012. Set to hold steady around $92 as participants decipher the reasons for recent declines.

Gold [$1784.50] – On one end, a break above $1750 demonstrates ongoing strength that aims to reach all-time highs of $1895 set last September. However, staying above $1750 for a considerable time has been challenging. In November 2011 gold peaked at $1795 and on March 2, 2012 the commodity stalled at $1781.

DXY – US Dollar Index [79.32] – Since late July, the dollar strength run has taken its familiar course of depreciation. In recent weeks, the dollar has been attempting to stabilize, but appears to trade around its multi-year average.

US 10 Year Treasury Yields [1.75%] – The last two months are establishing a new tight range between 1.60% and 1.80% as more clues are awaited for a noteworthy move.

http://markettakers.blogspot.com

Dear Readers:

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed

Market Outlook | September 10, 2012

“Society is always taken by surprise at any new example of common sense.” Ralph Waldo Emerson

Common sayings

The three common prevailing themes these days circle around re-accelerating gold prices, overvalued stock market and weakening Euro. As to how these themes materialize remains an art form that will play itself out. Deciphering the chances of all three themes having an unexpected or inverse result is even more appealing then the currently presented conventional thinking.

The thought process of high gold prices, lower stock market and weakening Euro stems from daily reminders of economic slowdown and ongoing efforts of easing by central banks. This collective growth concern has plagued large (especially China) and smaller nations in recent months. Thus, the inescapable nature of interconnected markets creates a gloomier outlook for those shaped by current events. These fragile growth related issues may reinstate further thoughts that all three themes will play out in a "logical" manner. At least, experience teach us the power of self-fulfilling prophecies should not be underestimated. However, accepting a gloomy outlook because it is a good or logical story is not prudent for a participant looking to capture trends.

A Multi-purpose idea

From a participants point of view, having clarity of the “instrument” is a good start. As in, is gold a commodity or a currency or both? Is it a speculative instrument or a long term investment? Perhaps all of the above is the sentiment that is being felt and those forces are unpredictable in their waves. Yet, staying weary of these so called "obvious" statements usually ends up rewarding the skeptical observer. These days gold is popular not only as an investment tool but a political tool as a commodity that has rustic appeal and historical appeal. Plus, gold is a hedge for gloomy outlook or system breakdowns that are pending. Perhaps, there is a comfort in holding in a perceived safe instrument.

Gold aficionados are sensing a bottoming process form over the summer. That encouragement is fueled by an 11% rise in gold prices since mid-July. A much anticipated gold rally lurked in the background and reawakening the gold bugs. Yet, the goal of diversification away from major currencies is not to be confused with gold price appreciation. In other words, fear of dollar and Euro depreciation might be compelling to look for some gold exposure. Sure, that’ s a portfolio management decision to hold some the same way central banks manage their balance sheet. Sometimes confusing a hedge with an investment does not have a pleasant outcome. In the near-term, the higher gold prices go the higher the conviction of those awaiting this commonly accepted expectation.

Sustainability doubted

Observers are noticing the rise in stock markets and ongoing strength of corporate earnings and asking the question: is this sustainable?

It is a logical question that begs for increased clarity, but the uptrend is too difficult to dismiss or ignore. Of course, some pundits remind us that The S&P 500 index keeps making its stride towards the 2007 highs led by technology but wide participation is visible – even banks are recovering. The well followed stock indices are up 14% for 2012 and if one was too busy reading the “slow down” headlines then these gains would’ve been harder to visualize. For a focused trader, all the noise of market concern has been the loudest distraction, but fundamentals have been solid.

Bank analysts (ie. Bank of America and RBC) are beginning to send out cautious forecasts for equity markets between now and year-end. This is hardly surprising and somewhat predictable for veteran observers. As volatility remains low these conditions invite the contrarian crowd to bet against all global markets. That bet has been mistaken several times this year in which some envisioned increase turbulence leading to stock demise. The set up for a stock market correction may be plausible but evidence is not quite as visible as desired by most naysayers. Thus, the positive momentum remains in place.

Undesirable challenge

Much of the discussions and cautious investor sentiment centers around a fragile European stability. Importantly, there is an ongoing assumption that Europe can not solve its problems and the Euro currency is bound to collapse. Yet, the preservation of the Euro appears to be a priority despite a mountain of complex challenges. For risk takers, the erosion of the Euro value has not materialized as expected. Obviously, the political mess for resolution and increasing unemployment is discomforting in the Eurozone. The emotional responses to these events is visible as Greece enters the fifth year of recession. Now, the contemplation of Greece leaving the Euro is on the table but impact on currency might be another story. As an editorial reminded us this weekend: “If Greece, the weakest link, is forced out of the monetary union, that would actually strengthen the currency. The result would be so chaotic for Greece that the other debtor countries, observing the wreckage, would do whatever it took to avoid the same fate, cutting their deficits even more quickly and accelerating other reforms.” (Washington Post, September 7, 2012). Thus, the fate of the Euro may not be as clear as some point out and, as usual, the timing is tricky for observers and costly for participants.

Stimulation continued

Intense anticipation of further easing by the Federal Reserve is understandable but the unintended consequences stir up additional suspense and colorful opinions. The unfolding events trigger this question: Does QE3 provide further economic spark or does it showcases further economic desperation?

Guessing how participants react from a psychological point of view is more noteworthy for speculators than QE3’s impact. The US jobs number translated to an overall weak result but sparked a curiosity in the pending easing announcement. The impact of all stimulus efforts seems mysterious to most and too early to tell its success. Importantly, tracking inflation expectation remains a vital barometer that will shape investors mindset. Closely watched indeed. Rising inflation most likely is set to reinforce that the recovery is taking place and potentially not fully recognized by the marketplace given the infestation of “gloomy” outlooks. If that’s the case then inflation expectation remains the rewarding surprise for those betting on increasing stock prices. Perhaps, then one would have a better idea on Gold, stocks and currencies.

Article Quotes:

“The campaign to change German attitudes will therefore have to take a very different form from the intergovernmental negotiations that are currently deciding policy. European civil society, the business community, and the general public need to mobilize and become engaged. At present, the public in many eurozone countries is distressed, confused, and angry…..Currently, the German economy is doing relatively well and the political situation is also relatively stable; the crisis is only a distant noise coming from abroad. Only something shocking would shake Germany out of its preconceived ideas and force it to face the consequences of its current policies. That is what a movement offering a workable alternative to German domination could accomplish. In short, the current situation is like a nightmare that can be escaped only by waking up Germany and making it aware of the misconceptions that are currently guiding its policies. We can hope Germany, when put to the choice, will choose to exercise benevolent leadership rather than to suffer the losses connected with leaving the euro” (George Soros, The New York Review of Books, September 7, 2012).

“The National Development and Reform Commission last week approved 25 urban rail and 13 highway construction projects, and a number of water schemes. The problem is one of financing. Few details were released. Asset quality is fast deteriorating among Chinese banks as bad debts emerge from the latest round of misspent stimulus. That will damp their will to lend. And local government finances are in tatters. Beijing estimates that their debts stand at Rmb11tn, or a quarter of China’s output. Moody’s thinks the debts could be Rmb3.5tn higher. Granted, China has Rmb19tn in foreign exchange reserves and a strong official fiscal position. But converting reserves into renminbi to spend at home will destabilise the exchange rate. And disguised indebtedness in local governments could put the debt-to-output ratio far north of its official 17 per cent…. Urbanisation remains a long-term play. About 70 per cent of China’s 100-odd cities with a population of 5m or more do not have a metro, HSBC notes. But in today’s tougher funding environment, big spending announcements will not translate into guaranteed growth.” (Financial Times, September 9, 2012)

Levels:

S&P 500 Index [1437.92] – Broke above the spring highs of 1420 and now making new yearly highs. Positive momentum continues despite chatter of a peak that’s overly anticipated.

Crude [$96.42] – Last 15 days trading action suggest a narrow range between $95-97. Near-term momentum waning despite the explosive run from $80 to $96 in recent months. Appears that participants are waiting for a catalyst to dictate the next noteworthy move.

Gold [$1728.00] – For few months the commodity traded in a narrow range between $1550 and $1650. Now the recent lift above $1700, creates a momentum and increasing expectation to elevate above or to $1800.

DXY – US Dollar Index [82.59] – Noticeable downtrend since late July in which the index has fallen by nearly 5%. Some of the decline may be linked to anticipation of further easing.

US 10 Year Treasury Yields [1.68%] – Stuck in the familiar range below 2%. Increasing odds in days ahead where yields stay around the 1.60% to 1.80% zone.
http://markettakers.blogspot.com

Dear Readers:

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only, and they are in no way intended to serve as personal investing advice. Readers should not make any investment decisions without first conducting their own, thorough due diligence. Readers should assume that the editor holds a position in any securities discussed, recommended, or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any Publish Post, considered liable for the future investment performance of any securities or strategies discussed