Friday, April 5, 2013

The Morning Call---Money, money everywhere, but no growth in sight


The Morning Call

4/5/13

The Market
           
    Technical

            While the Market rebounded yesterday, I was not that impressed with its strength.  The indices (DJIA 14606, S&P 1559) finished within their short term uptrends (13097-14606, 1521-1595), their intermediate term uptrends (13604-18604, 1446-2040) and their long term uptrends (4783-17500, 688-1750).  However, they continue to diverge on their all time highs---the Dow being well above its high (14190) and the S&P failing to date to even challenge its high (1576).

            Volume was down; breadth recovered a bit.  The VIX fell, closing within its short and intermediate term downtrends.

            GLD (150.28) declined again, finishing very close to the lower boundary of its short term downtrend.  It has negated that developing support level to which I frequently referred and is now poised to challenge the lower boundary of its intermediate term trading range (148.16).

Bottom line: while stocks lifted off an oversold position yesterday, it looked pretty paltry to me especially in light of the triple/triple we got (three major central banks  easing [again] and the Bank of Japan re-re-doubling its pledge to flood the Market with yen. 

However that may play to my prejudice, in the end, we are still stuck with the question, is the Market topping or building a base for a further advance?  Until we know that, doing nothing seems to me to be the prudent strategy.

                Sentiment declines again (short):

    Fundamental
    
     Headlines

            Only one economic datapoint yesterday; but it was one that gets a lot of attention---weekly jobless claims.  The number was not good, though there were some mitigating seasonal factors impacting the results. 

            In any case, no one cared because the central banks were out doing what they do best---pumping up the volume:

(1)   the ECB and the Bank of England left rates unchanged,

(2)   Mario Draghi stated that Cyprus was not a template for further bail outs.  That means to me that [a] the eurocrats have deserted the rule of {bankruptcy} law as quickly as they seemingly adopted it and [b] we are now back to square one where no one knows what these clowns are going to do in the next crisis---leaving the risk that they can do something as stupid and arrogant as their first move in the Cyprus {taxing insured deposits}.  Why this didn’t cause great consternation among the unwashed masses is beyond me; but then much has been beyond me of late,

However, the CEO of Italy’s largest bank says uninsured deposits are fair game (medium)

 Spain’s social security pension is now 97% invested in sovereign bonds   (medium):

(3)   the real jim dandy development was the Bank of Japan’s announcement that it would double its monetary base in the next two years.  This, of course, will give a whole new meaning to parabolic money growth.  To give you an idea of the order of magnitude of this deforestation exercise, Japan is printing money at roughly 70% of the Fed but it is an economy that is only one third the size of the US.  And wouldn’t you know it was favorably received by most of the ‘smart’ investors.

Well, I confess, I am not the sharpest tack in the box; but doubling the money supply in 24 months just doesn’t seem like an idea than will lead to a great ending.

               Japan’s shock and awe (short):

                 George Soros’ opinion (short):

    And from Deutsche bank (medium):

    Bottom line: I said in yesterday’s Bottom line that I wouldn’t read too much into that day’s headlines.  I can’t make the same statement today.  The reason is that the BOJ kicking in the afterburner on money printing will only aggravate one of the tail risks about which I am currently concerned: the after effects of central banks flooding the world with money.  Not to be repetitious, but this can’t end well.

            I remain quite happy with our cash position.

            The latest from Doug Kass (medium):

            Why bond yield versus earnings yield is a flawed concept (medium):
           
     Investing for Survival

            Six steps to stash your cash overseas (medium):

            And (medium):

            The money-ness of bitcoins (medium):




Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at

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