Tuesday, March 25, 2014

Control your risk with simple and winning rules - Free trading signals for 26 March

Super Stocks Trading Signals Report

Latest Free Trading Alerts for 26 March Download Historical Results
Open position value at 25 March $ 12,268.65 2014 P/L   +3.87%

Mixed long/short open position
Today no new entry orders, new orders for tomorrow.

5 Open Positions 
3 Long 
2 Short  
5 with Stop Loss at breakeven

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I simulated 25% margining and modified initial  capital to $ 500K


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Material in this post does not constitute investment advice or a recommendation and do not constitute solicitation to public savings. Operate with any financial instrument is safe, even higher if working on derivatives. Be sure to operate only with capital that you can lose. Past performance of the methods described on this blog do not constitute any guarantee for future earnings. The reader should be held responsible for the risks of their investments and for making use of the information contained in the pages of this blog. Trading Weeks should not be considered in any way responsible for any financial losses suffered by the user of the information contained on this blog.

S&P500, GOLD And Crude OIL Outlook

By: Gregor_Horvat

&P500 Daily: wave five reversing from resistance zone
S&P500 has been in bullish mode since February but it looks like that the direction of a trend could be changing now after a rally up to 1880/1920 Fibonacci and channel resistance area, where we see zone for a completed fifth wave in wave 5) of (3). So far, market is reversing nicely down with a weekly close price at 1839 so we suspect that market will continue to the downside now for a three wave pullback down in blue wave (4). We are also looking at the RSI that is reversing from 60/70 area that can be signaling for a bearish pullback, similar like in the past few months.

GOLD Daily: triangle; now wave C down
On Gold we presented you a triangle idea few weeks back, with wave C rally up to 1380/1400 resistance area. Market sold of sharply from that levels last week and it seems that price is ready to continue lower in the next few days and weeks as current decline looks impulsive on the intraday basis. With that said, we suspect that wave D is now underway that may reach revels even around 1240/1270.

OIL Daily: wave B at the support zone
Crude oil turned bearish as expected in March after hitting 105.00 level where we see a completed wave A, so current leg down is most likely wave B that may form a new based for this market around 61.8% retracement level. A bounce from that zone, in impulsive fashion, will put wave C in play for rally up to 106.00 area to completed wave 2).
Further weakness from current levels and down to 94.00 in impulsive fashion will suggest an early reversal in trend of crude oil. In that case we would put alternate count in play; completed wave 2) 105.10.

See the original article >>

Insight from the Latest China Business Survey

By Stan Abrams

It’s always difficult for me to find something interesting to say about the American Chamber of Commerce’s annual China business survey. The content itself is often of marginal value, with only a couple significant trends hiding away down in the data to be ignored by the mainstream press. Speaking of which, the domestic newsies like to tout optimism stories, while the foreign press enjoys highlighting pessimism, higher costs, IP infringement, and so on. This year is no different in that regard, although there are a couple of items worth mentioning.

The Chamber itself has to be neutral and careful with its rhetoric, so you always get the same vanilla pronouncements. Here’s this year’s message from the Chairman, perfectly written to put folks to sleep:

This year’s Business Climate Survey reflects the new realities of operating in China and the associated uncertainty, but also the optimism and confidence among AmCham China members that the country’s leadership is set on reform and that foreign business has an important role in China’s future.

{non-judgmental yawn}

No one will be surprised by most of the trends highlighted by the survey. Higher costs, lower revenue, cautious attitudes about economic slowdown and government reform — yeah yeah, we know. It’s probably worth your time, however, to take a close look at the material on labor issues. Higher compensation is an old story, but I was surprised just how difficult it is these days for companies to find qualified staff. #1 problem for many companies — didn’t know it was that bad out there.

How about Airpocalypse? Any pollution-related stuff here? Yes, indeed. Almost half of respondents say they’ve had trouble with recruitment and retention because of air quality. In 2010, that number was less than 20%. Has the air gotten that much worse in the last few years? Worse, yes, but that huge swing in responses must be in part a factor of changing public perception.

And I can’t talk about perception without touching on IP. A majority of respondents say that IP enforcement is either ineffective or totally ineffective. Given that the highest response type back in 2010 was “Don’t Know,” I find it difficult to ascertain what people actually understand about this issue. A clear majority also say that IP enforcement has improved or stayed the same in the last five years. So the bar was so low five years ago that even with improvement, the system is still completely useless?

There is a clear trend here of a rising sense that the system is ineffective. This has risen from 33% of respondents in 2009 to 54% this year, dropping slightly from a high of 58% in 2013 (the “totally ineffective” numbers have risen as well). That would be utterly depressing (if I thought it an accurate reflection of reality). Has the system deteriorated significantly over the past few years? I’m not a private practice IP lawyer any more, and yet I think I would have heard about such a dramatic shift, particularly when legal reforms are still proceeding apace. Again, I have to wonder whether there is a perception/reality gap here.

Additionally, respondents are much more favorable towards administrative enforcement over court action when it comes to infringement cases. No surprise there — the admin route is the one you take when you want quick action and don’t care so much about money. Procedure is straightforward and quick; if you have a trademark or patent, you hire an agent and apply for a raid, and you’re off to the races. If you end up in court even with a winning case, you’ll still have a judge trying to force you into a settlement. And even if you get a favorable judgment, you might not even recoup your costs.

With respect to specific types of IP issues, respondents highlighted company name protection and trade secrets as being of particular interest these days. I’m afraid I don’t understand what the problem is with company name protection. Many managers I know do not even understand the difference between a company name and a trademark, and it would surprise the hell out of me if a large number of respondents are embroiled in disputes over their company name registrations. Something screwy with this one.

On the trade secret/hacking front, a sizable majority see the risk either increasing or staying the same, and yet over the past three years, only about 1/4 of respondents say that their info has been stolen. By the way, asking folks whether their proprietary data or trade secrets have been stolen is perhaps not a good way to frame the question. Who hasn’t had an ex-employee take some info on his way out? So I’m thinking these numbers might make the problem look much worse than it is. Coupled with all those sensational hacking and industrial espionage stories floating around out there, I’m not surprised at the heightened perception of risk.

Before signing off, here’s my usual advice for anyone reading these surveys: take ‘em for what they are, and don’t read media summaries that attempt to make sweeping generalizations. Look for significant trends and issues that appear to be important to management types, but do not then automatically assume that their perceptions are always an accurate reflection of reality. (That obviously applies to my opinions as well.)

See the original article >>

Charting a garden-variety market pullback

By Michael Ashbaugh

CINCINNATI (MarketWatch) — Despite recent volatility, the U.S. markets’ technical backdrop remains constructive.

Consider that the S&P 500 Index has maintained major support at 1,850 — almost precisely — and its path of least resistance points higher barring a violation of this area.

Before detailing the U.S. markets’ wider view, the S&P 500’s hourly chart highlights the past two weeks.

As illustrated, the S&P’s price action remains technical.

The index topped last week at 1,883.97 — matching resistance, detailed last week — and has pulled in from the range top.

Conversely, the S&P bottomed Monday at 1,849.7, marking its second successful test of support across the past four sessions.

Meanwhile, the Dow industrials’ near-term backdrop is similar.

In its case, the index topped last week at 16,456, matching resistance at the March closing peak of 16,452.

And the Nasdaq Composite’s near-term backdrop remains the weakest.

The index plunged to one-month lows in Monday’s action, violating notable support better illustrated below.

First resistance now rests at its breakdown point, spanning from 4,242 to 4,246.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq’s backdrop has taken a shaky turn. Two inflection points stand out:

  • Support at the breakout point, the January peak of 4,246.

  • The Nasdaq’s 50-day moving average, currently 4,222.

The index closed Monday at 4,226, placing it just atop the 50-day.

This is a widely-tracked intermediate-term trending indicator, and the Nasdaq hasn’t closed under its 50-day moving average for more than five consecutive sessions since December 2012.

Moving to the Dow, its March price action remains trendless.

Two support points stand out:

  • Dow support at the November peak of 16,175.

  • The Dow’s 50-day moving average, currently 16,125.

This area marked an inflection point late last month, and remains a useful bull-bear technical gauge.

And the S&P 500’s backdrop highlights the headline technical tension.

Consider that the index topped last week almost precisely at its all-time high — S&P 1,884 — and has pulled in to a successful retest of support at its 1,850 breakout point.

The bigger picture

Despite this week’s whipsaw, the broad-market technicals remain constructive.

Consider the following:

Starting with the small-caps, the iShares Russel 2000 ETF /quotes/zigman/260873/delayed/quotes/nls/iwm IWM -0.23%  has thus far maintained support at its breakout point and the 50-day moving average.

See the original article >>

Fed is hoping it's all just the weather

By Daniel P. Collins

Last week was a most interesting one for the Federal Reserve and its new standard bearer Janet Yellen, who caused a bit of controversy by spelling out—in more detail than Fed watchers are used to—a timetable for not only tapering but when the Fed will actually begin to tighten. (Please no comments on the taper/tighten debate, let’s just say the Fed has begun the unwinding process and leave it at that).

Yellen was championed by the left because she was thought of as the most dovish option but her comments last week seemed downright hawkish. I don’t think Yellen has changed her stripes but she is committed to providing stable forward guidance to a marketplace that has been whipsawed by a risk on/risk off world over recent years. She may be pinning too much hope on the belief that the recent economic downturn is simply weather related and not a sign of a more significant slowdown.

Gold guru Jim Sinclair in a recent post on Minset.com indicated that Yellen may be in for a surprise. “Chair Yellen has placed herself between the rock of recession and the hard place of playing the hawk,” Sinclair notes, “A global recession cannot produce an isolated USA, but rather underscore the heart of the recent U.S. economic figures as a reflection of an insular American economy following the world back into recession, not entirely extremely cold weather related.”

He points to China’s declining growth as proof of a global economic slowdown that will force Yellen to revert to form. “The idea that stimulation can be withdrawn without draconian economic results is simply false,” Sinclair writes. “Yellen is truly dedicated to full employment and is going to go into shock over the next few short months at the divergence between her economic modeling, the behavioral economic projections and the degree of economic contraction in the US. She will revert to her long standing dovish viewpoint of the mandate of the Federal Reserve and move this hyper stimulation ($4 trillion) into a higher gear than before.”

This is similar to the viewpoint of hedge fund manager Mark Spitznagel, who we talk to in our April cover story. Despite signs to the contrary, Spitznagel doubts the Fed’s ability to carry on a taper.

It is somewhat of a depressing outlook as his ultimate prediction is for a market crash at some point due to the misallocation of resources. It is one thing to carry on a boom and bust cycle but this time we really didn’t get a boom.

Sinclair indicates that folks in the East are buying gold for this inevitable rainy day and there are some anecdotal signs that he is right. He states, “QE to Infinity, followed by Gold balancing the balance sheets of the sovereign balance sheet disasters. Just as there is no tool other than QE to feign financial solvency, there is no tool to balance the balance sheet of the offending entities other than Gold.”

Here’s hoping it is just the weather.

See the original article >>

The Deflationary Threat To The 1990's Replay Story

by Lance Roberts

Yesterday, I wrote a piece discussing why "It Is Impossible To Replay The 90's" and making the point that we are most likely currently replaying the 1970's instead.  My friend and colleague, Doug Short, emailed me with a valid point suggesting that the inflation of the 70's, due to the Arab Oil Embargo, was not likely.  The real concern, in his opinion, is that we are in an era of stagnation, with the ongoing risk of deflation being the real "wolf at the door."  To these points, I very much agree.

As a point of clarification, my comments regarding the 70's was more about the 18-year bear market cycle that left investors deeply scarred after three successive bear markets.  However, Doug's point is very interesting and is something that is a much more relevant threat to the current "recovery story" going forward.

As I have discussed previously, the real threat to the Central Banks of the world is "deflation."  Deflation has a deleterious effect on economic growth and once the deflationary cycle takes hold, it is extremely difficult to break.  This is why there is such a focus by the Central Banks to create a rise in "controllable inflation" through ongoing injections of liquidity via monetary policy.  Of course, the reality is that inflation is a function of a variety of factors and there is NO historical evidence that inflation can be contained, or controlled, by monetary policy once it appears.

The chart below is the STA Composite Inflation Index which is simply the average of the Producer Price and Consumer Price Indexes.  With inflation still running well below the Fed's target inflation rate of 2%, despite increasing their balance sheet to over $4 Trillion, the issue of ongoing deflationary pressures is evident.


Note: It is also important to note that sharp spikes in inflation have also subsequently led to recessionary bouts in the economy.  In other words, be careful what you wish for.

First, let's discuss what comprises inflation. In my view there are three components to inflation:  the velocity of money, wage growth and commodity prices.   The velocity of money is how fast money moves through the economy.  As money is loaned to businesses to create new products, build plants or expand employment - increased demand leads to higher prices.  As employment is increased, and the slack in the labor force is absorbed, the competition for employees causes wages to rise.  Higher wages lead to higher demand for goods and services.  The increased demand for goods and services leads to higher prices for the raw materials needed to produce those products.  In other words, these three components work together in creating inflation.  The index below is a composite index of these three factors to show the level of inflationary pressures in the economy.


There are two important points to make about the chart above.  The first is the high correlation between the inflation index and overall economic activity.  This is EXACTLY what you would expect to see as rising economic activity leads to higher inflationary pressures and vice versa.  Secondly, notice the sharp drop in the index since the peak of economic activity in 2011-12.  Slowing rates of inflationary pressure has been a reflection of slowing rates of economic growth.

The chart below breaks out the three components of the inflation index above so you can see what is happening more clearly.


With all three components of the index on the decline there is little evidence of stronger economic activity on the horizon.  The risk, as Doug stated, is a continuation of the stagflationary economy with ongoing threats of deflation along the way.

I wrote last year that the Federal Reserve has gotten itself caught in a liquidity trap much the same as Japan has faced for the last 30 years.  To wit:

"The signature characteristic of a liquidity trap are short-term interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in general price levels.  The chart below shows that, in fact, the Fed has actually been trapped for a very long time."


"The problem for the Fed has been that for the last three decades every time they have tightened monetary policy it has led to an economic slowdown, or worse, as shown by the vertical dashed lines. The onset of economic weakness then forced the Federal Reserve to once again resort to lowering interest rates to stabilize the economy.

The issue is that with each economic cycle rates continued to decrease to ever lower levels.  In the short term it appeared that such accommodative policies did in fact aid in economic stabilization as lower interest rates increased the use of leverage.  However, the dark side of those monetary policies was the continued increase in leverage which led to the erosion of economic growth, and increased deflationary pressures, as dollars were diverted from productive investment into debt service.  Today, with interest rates at zero, the Fed has had to resort to more dramatic forms of stimulus hoping to encourage a return of economic growth and controllable inflation."

The problem for the financial markets is that, as discussed previously, asset prices have detached from the underlying fundamental factors.  The aging demographic trends will continue to strain the financial system forcing increasing levels of indebtedness to offset the rising cost of living.  That drain on the financial system, combined with poor fiscal policy to combat the myriad of issues restraining economic growth, does bode well for a return to the 1990's type stock market.  The continued monetary interventions are likely doing nothing more than continuing its long tradition of fostering boom/bust cycles in financial assets.

As I stated recently in "What Inflation Says About Bonds & The Fed:"

"The real concern for investors, and individuals, is the actual economy. We are likely experiencing more than just a 'soft patch' currently despite the mainstream analysts' rhetoric to the contrary. There is clearly something amiss within the economic landscape, and the ongoing decline of inflationary pressures longer term, is likely telling us just that. The big question for the Fed is how to get themselves out of the 'liquidity trap' they have gotten themselves into without cratering the economy, and the financial markets, in the process. As we said recently this is the same question that Japan is trying to figure out as well."

The chart below shows the Japan problem.


Should we have an expectation that the same monetary policies employed by Japan will have a different outcome in the U.S?  That seems to be the general theory by the majority of analysts and academia.  Of course, this is no longer just a domestic question since every major central bank is now engaged in coordinated infusions of liquidity.

For individuals, this is the real "monster in the closet."  Rising inflationary pressures can be offset by purchasing assets that rise with inflation such as commodities, hard assets, real estate, etc.  However, in a stagflationary, or a more damaging deflationary cycle, there are no real solutions.  This is why deflation is such a concern.

The Federal Reserve is currently betting on a "one trick pony" to jump start an economic growth cycle.  The hope is that the inflation of asset prices and suppression of interest rates will kick start a organic, self-sustaining, economic recovery.  However, as I stated yesterday, these programs have in effect actually run in reverse by acting as a transfer of wealth from the middle class to the rich.  This "reverse robin hood" mechanism has likely done little more than fuel the next asset bubble without any repairs to the underlying fundamental economy.  Dr. Richard Fisher, President of the Dallas Fed, recently made five points in this regard:

1) QE was wasted over the last 5 years with the Government failing to use "easy money" to restructure debt, reform entitlements and regulations.

2) QE has driven investors to take risks that could destabilize financial markets.

3) Soaring margin debt is a problem.

4) Narrow spreads between corporate and Treasury debt are a concern.

5) Price-To-Projected Earnings, Price-To-Sales and Market Cap-To-GDP are all at "eye popping levels not seen since the dot-com boom."

In response to Doug's point - "this time is indeed different" from the 1970's.  However, it is different only from the standpoint that what confronts the markets, and the economy, is not worries of spiking inflation but an ongoing, persistent and pervasive threat of deflation.  Increases in productivity, a large amount of slack in the real labor pool, low levels of demand and, as discussed yesterday, a highly leveraged consumer all contribute to the ongoing problem.  Regardless, the fundamental and economic environment will remain clear headwinds to the start of the next "secular bull market" for some time to come.  While it is entirely possible that we could see a further "melt-up" in stock prices in the months ahead, rising asset prices and a surging economic recovery are likely to remain two different things.

See the original article >>

Year of the Horse


A Flashing Buy Signal form VIX?

By Dave Moenning

Before we were so rudely interrupted by all the hullabaloo surrounding Janet Yellen's definition of a "considerable" amount of time (now known to be six months), we were looking at how the VIX could be used to help identify decent entry points for traders looking to get long the U.S. stock market.

And since the market still appears to be trying to make up its mind which way things will go from here, this appears to be as good a time as any to expand on the idea of using the VIX to "buy the freaking dips."

As discussed earlier in the week, a simple (okay, really simple) approach to identify turning points in the market after a correction is to wait for the VIX to first spike and then reverse lower.

Below are the charts we used as Exhibit A. No, this is not a sophisticated approach. But hey, it DOES seem to do a decent job.

S&P 500 Daily

If you will recall, at the end of Wednesday's report, we promised to apply some fancy math to this approach to see if we couldn't come up with a more consistent, more quantifiable way to use the VIX to help you BTFD. So here goes.

But First, Some Caveats

Before we get started, there are a couple caveats worth noting. First, it is important to recognize that the character of the stock market has changed over the last few years. Blame it on Virtu, Getco, Citadel, Goldman (NYSE: GS) orJPMorgan (NYSE: JPM) and their algos if you'd like. But there should be little argument that both the volatility and the speed with which moves now occur have increased.

Related: Should Investors Be Focusing More on China?

Next, too many investors believe that all stock market indicators produce strong buy and sell signals. This is simply not true. Some indicators provide excellent buy signals but lousy sell signals, and vice versa. So please don't think any single indicator can provide you with accurate signals to move in and out of the markets.

In this case, we are looking at only the buy side of the indicator - for good reason.

Finally, it goes without saying that investors should never use any indicator in a vacuum. No, the game is a wee bit harder than that. The trick is to find a quiver full of weapons to use, and then know which arrow to use and when.

Our VIX Buy Signal

With the necessary disclosures and disclaimers out of the way, let's get to our buy signal. The idea is to use the VIX and its 20-day moving average. Simple enough, right? Next, we need to calculate the number of standard deviations the VIX is from its 20 DMA. A little tougher, but a quick Google search should do the trick.

So when the VIX first moves more than two standard deviations from the 20-day, and then reverses below the two standard deviations line, a buy signal is flashed.

That tells us the market has experienced a correction and a corresponding spike in the VIX. Then, when the VIX moves back below the two standard deviation line, it tells us that volatility is retreating. This in turn means the correction in stock prices may have run its course.

The Stats

Since 2011, there have been 21 "initial" buy signals given. Note this indicator often produces "double-barreled" buys -- as the VIX oftentimes spikes, retreats and then spikes again. For our purposes, we are using only the first buy signal.

Of those 21 buy signals, 17 have led to higher prices in the ensuing weeks on the S&P 500. If my calculator is correct, this means when our VIX Buy Signal occurs, the odds of success are 81 percent. Not bad, eh?

Looking at the stats back to 1995, fuve days after an initial buy signal the average gain on the S&P is +0.27 percent, which is exactly 50 percent better than the average gain of +0.18 percent for all five-day periods.

Two weeks after the buy signal, the gains in the market are again about 50 percent better than average (+0.53 percent vs. +0.35%). And four weeks later, the S&P's average gain has been +1.11 percent, which is 61 percent better than the average gain of 0.69 percent for all 20-day periods.

When eye-balling the chart of this indicator, it is clear that this indicator has been quite good over the past two years. In short, the buy signals have consistently provided investors with very good opportunities to BTFD's.

The Latest Signal

The latest buy signal was flashed on March 17 (the one before that occurred at the end of January). So while there are never any guarantees at all in this business, this indicator does seem to tell you the odds favor the bulls for the next few weeks.

To be sure, the recent dip wasn't much -- and of course there is a chance that it isn't over. However, our VIX signal did flash an initial buy. And with 81 percent odds, you couldn't be blamed for buying this little dip.

See the original article >>

IceCap: "Which Bubble Is Created Next?"

by IceCap Asset Management

Rock star status is achieved by the very few. To be eligible, one must simply be held in a very high regard. It’s difficult to achieve, but once you’ve earned this distinguished level of recognition, in the eyes of many you can never do wrong. Until of course you do.

In universities, students no longer aspire to become hedge fund managers, or investment bankers – that is so 2000s. Today, the really sharp knives all want to become a central banker. Posters of Warren Buffett and Ray Dalio have been replaced with the Mona Lisa-like grins of Mark Carney, Ben Bernanke and Janet Yellen.

It is true that these masters’ of the universe control the levers that affect our global economy, but is the praise, the respect, and the power justified? Sadly, no.

Reading down IceCap’s memory lane, you’ll recall our November 2012 “Salma Hayek” publication which described how world leaders had two choices in the way to manage the global economy.

The first option was based upon economic theory by Friedrich Hayek who claimed that the economy couldn’t be and shouldn’t be managed on an acute basis. Mr. Hayek believed that governments should simply ensure there was enough money available. That was about it.

If only our leaders had listened.

Instead, the financial world we enjoy today chose the second option which was built entirely on the mislead belief of John Maynard Keynes, that man could in fact control or better still eliminate the business cycle by changing interest rates, changing tax rates, and spending more money than you own.

In theory, this approach works beautifully. Then it meets reality. From our perspective, reality arrives when there are no more interest rates to cut, no more taxes to cut, and no more money to spend.

Chart 1 shows the success enjoyed by the US central bank’s interest rate policy over the years. In 1997, the Asian crisis followed by the Russian crisis followed by the collapse of a gigantic hedge fund, allowed the American central bank to plant the seeds for the next crisis which turned out to be the tech bubble.

At the time, both financial pundits and the big banks with their balanced funds proclaimed that the world had indeed entered a different financial and economic era – yes, this time it was different.

Of course 4,000 Dow Jones Industrial and NASDAQ points later, the sheep started to lazily admit that perhaps this new post-Y2K economy wasn’t all that it was cracked up to be.

Not to worry, once again the American central bank mounted their ponies and rode the global economy straight into several years of ultra-low interest rates. The hope (there’s that word again) was that really cheap money would encourage people, companies and governments to borrow and spend again.

And borrow and spend they did – right smack into the biggest housing bubble in economic history. Day traders became passé, and the newest game in town was flippin’ houses. Rich people flipped mansions, plumbers and teachers flipped suburban homes and even Vegas strippers got in on the act and flipped condos among other things. By the time it was over, the entire world was flipped upside down – courtesy of the US Federal Reserve and their interest rate machine.

And this brings us to the next global crisis, which we assure you is on its way. After all, Chart 1 proves it is crystal clear that every time the US Federal Reserve acts to "save us" from one crisis, it directly sows the seeds for an even bigger crisis in the future.

The thing to understand about the US Federal Reserve is that although it makes decisions to acutely affect the American economy, it also directly affects the economies of other countries around the world. First of all, many countries do not have their own currency and instead rely upon the US Dollar. Others have their own currency, yet have it directly tied to the US Dollar and therefore the interest rate policies that come with it.

Since 2009, the 0% short-term interest rate policy, money printing, bailouts, implicit and explicit guarantees effectively been exported to the entire US Dollar world.

To put it another way, we estimate that only about 40% of America’s economic stimulus has actually stayed in America – the remainder has flowed elsewhere. But what has made this policy especially ineffective, is that the stimulus has been indirectly thrown at the economy in the form of lower interest rates and higher stock markets. In other words – these extraordinary stimulus plans are not March 2014 Connecting the Dot reaching the real economy and the average person on the street.

Now the curious thing about our world’s financial leaders is that they all read from the exact same playbook. It may come in different names, shapes and sizes but at the end of the day the Bank of England, the European Central Bank and the Bank of Japan all hum and whistle to the same tune as the US Federal Reserve.

This means all of the world’s biggest economies and biggest borrowers have 0% interest rates, money printing and explicit and implicit guarantees for various countries and companies who need to borrow money.

This point is important to understand and this is how you connect the dots to the next crisis on the horizon.

These extreme interest rates, money printing and debt guarantees have created the illusion that everything looks marvelous. On the surface, stock markets are rising, and bankrupt countries look beautiful when borrowing in the bond market.

Yet, when you strip away the wonderful headline news, you can see that no country is decreasing the money they owe. Worse still, new jobs and wages are not increasing enough to maintain an accelerating economy. This is an economic death sentence – debt totals continue to rise, not decline.

What this means is that the weakest of the weak countries are gradually reaching the point where either they won’t be able to borrow additional money, or implicit guarantees from a larger country will no longer be available.

See the original article >>

Russian government controls some 60% of the market - good luck to foreign shareholders

by SoberLook.com

Some investors have been jumping into Russian equities in the wake of the recent selloff. After all it's one of the BRICs that is now up "for sale" - assets that would have been in high demand just a year ago. But before getting too excited about this investment opportunity, consider the structural issues that smaller (particularly foreign) investors would face in Russia.

Barrons: - Russia's concentration of economic power means the state can hold its oligarchs for ransom and force enterprises to forgo profits at the bidding of politicians. A 2012 study by Troika Dialog Research estimated that the Russian state owns 30% of the equity market, with another 30% held by oligarchs and domestic "businessmen." Russia's 10 richest men own $25 billion in publicly listed Russian companies, according to Wealth-X, which tracks individuals of ultra-high net worth. The Russian stock market has a total valuation of $150 billion. Many of these rich individuals owe their wealth to Putin, so they aren't likely to defy him.

This means that in effect the state controls some 60% of the market because the Russian oligarchs will follow Kremlin's lead - simply to preserve their wealth and often their freedom (Khodorkovsky, who has been a leading financier of Russian opposition parties got 14 years in prison a few years back). In fact the situation could be getting worse as the oligarchs have bought additional shares in recent weeks to gain an even greater percentage of the market.
And just in case you are still considering making a long-term strategic investment into some Russian shares, remember that minority shareholders can be squeezed simply by not being a member of the elite "club" - see this story for example. It's no wonder that analysts have now labeled the Russian stock market a "frontier" rather than an "emerging" market (similar to many African markets except for poor economic growth - see story)
Foreign investors are especially vulnerable. With so much control of the market in the hands of the government, if Western sanctions tighten further and tensions escalate, Putin's retaliation could easily involve exacting pain on certain foreign shareholders. For those who wonder what a retaliation like that could potentially look like, here is an example from another emerging markets nation with an authoritarian government.

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Five Things You Should Know About Housing Reform Legislation

by Michael S. Canter

Posted by Michael S. Canter (pictured) and Matthew D. Bass of AllianceBernstein (NYSE: AB)

A recent US Senate bill calls for a restructuring of the government’s role in housing finance, including winding down Fannie Mae and Freddie Mac. Here are five takeaways from the current proposal.

1) A new regulator would be created. As part of the overhaul, government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac would be wound down within five years. A new entity, the Federal Mortgage Insurance Corporation (FMIC), would be created to regulate the mortgage market. The FMIC would approve and oversee the packaging of securities by newly formed guarantors, but also guarantee these securities, backed by the full faith and credit of the US government.  The guarantors, backed by private capital, would assume at least the first 10% of losses on the pools of mortgages they guaranteed.

2) Private firms will have to take on more risk, but that’s not necessarily a bad thing. The 10% requirement has been a sore point for many who think it’s too high.  Some are concerned that this could lead to an undue increase in consumer mortgage rates, but we don’t believe this will be the case. We expect that the guarantors will be able to enter into risk-sharing transactions (similar to Freddie’s Structured Agency Credit Risk, or STACR, bonds) in which some of the risk will be rated AAA. This will make funding this risk capital efficient, and have a less dramatic effect on borrowing rates than some fear.

3) Potential opportunities exist for private capital. A new housing law could eventually translate into significant opportunities for private capital as GSEs (Fannie Mae, Freddie Mac and Ginnie Mae) begin to lower their market share from today’s 90% to 50% or lower. The bill lays out a combination of private capital from guarantors and capital markets via risk-sharing transactions. This system will create very attractive opportunities in mortgage credit.

4) Existing Fannie and Freddie obligations will have a US guarantee. All previous Fannie and Freddie debentures and mortgage-backed securities will be backed by the full faith and credit of US government. Investors will also choose to exchange their existing bonds for newly created FMIC-backed securities. We don’t anticipate any changes or challenges to the language related to this particular stipulation.

5) The probability of the proposal becoming law soon is very low. We think the current reform legislation—the Johnson-Crapo Bill—will make it out of the Senate Banking Committee. But some Democrats fear that the legislation (as currently written) could disrupt the US housing recovery. In the House of Representatives, many Republicans don’t want the government involved at all, and are unlikely to budge from this position before the upcoming elections, in our view.

We’ve been advocating for reform of the housing market for some time, and while the final legislation may still be a ways off, we’re encouraged by the potential it may have for the mortgage market. We believe that the US mortgage market, as contemplated in this bill, will be the template for a newly created system—even if the bill isn’t successful right away. There are rewarding opportunities for private capital to be engaged in the mortgage business. This new system won’t change that—it will just cause the business to take a different form.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AllianceBernstein portfolio-management teams.

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The Incompetence of the Federal Reserve and Deep State Is Unavoidable

by Charles Hugh Smith

It's not the managers who are incompetent, it's the organization itself that is incompetent.

I received a number of interesting reader responses to my previous entries on the incompetence of the Federal Reserve and the Deep State:

The Federal Reserve: Masters of the Universe or Trapped Incompetents? (March 21, 2014)
Why Is Our Government (and Deep State) So Incompetent? (March 6, 2014)
Some readers thought I was underestimating the power of these institutions to pursue essentially unlimited money-printing and related global strategies.
While I understand the apparent power of unlimited money-printing and global Empire, my point (poorly articulated the first time around) was this:
The incompetence of these organizations is not a reflection of the competence or intelligence of their managers--it is the intrinsic consequence of their limited control of complex systems. If the system has reached the point of being ungovernable, even the most brilliant and experienced managers will fail because it's not the managers who are incompetent, it's the organization itself that is incompetent.

If we boil down the Fed's vaunted god-like powers, they can be reduced to four
levers: lower interest rates by purchasing interest-bearing assets, create the money to buy the assets, make free money (zero interest or near-zero interest) available to the global banking sector via lines of credit, and support/rig currency, bond and stock markets with purchases made directly or through proxies. (Thank you, correspondent Mike L., for reminding me about the Working Group on Financial Markets and the Exchange Stabilization Fund.)
That's it. Everything else is window-dressing.
Is it even plausible that any organization can control an immensely complex economy with four levers? The Fed's four levers exert no control over how much money is borrowed from the Fed or what insanely risky speculations and malinvestments the borrowed money funds.
The Fed can't even control if the free money stays in the U.S.; by one estimate, fully 60% of the Fed's free money has left the U.S. for higher-interest carry trades and speculations in the emerging economies.
The levers of power wielded by the centralized Fed and Deep State are too clumsy and limited to control a complex system at any useful level. The Fed, the Federal government and the deep State are all the wrong unit size.
This excerpt from Preparing for the Twenty-First Century by Paul Kennedy (1993) explains why:

The key autonomous actor in political and international affairs for the past few centuries (the nation-state) appears not just to be losing its control and integrity, but to be the wrong sort of unit to handle the newer circumstances. For some problems, it is too large to operate effectively; for others, it is too small. In consequence there are pressures for the "relocation of authority" both upward and downward, creating structures that might respond better to today's and tomorrow's forces of change.

All these centralized concentrations of power have moved into the diminishing returns phase of the S-Curve. As the unintended consequences of their efforts to manage complex systems with their clumsy, limited tools pile up, their profound failure of imagination kicks in and they do more of what has already failed.

The structural incompetence of centralized, wrong-unit-size agencies and central banks is global: the centralized strategies of China, Japan, the European Union and yes, Russia, too, will all fail for the same reasons: organizations with a few limited controls are intrinsically incapable of managing complex systems.
The Global Status Quo Strategy: Do More of What Has Failed Spectacularly (April 23, 2013)
The Master Narrative Nobody Dares Admit: Centralization Has Failed (June 21, 2012)
"Do you know what amazes me more than anything else? The impotence of force to organize anything." (Napoleon Bonaparte)

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South Africa platinum strike causing "irreparable" damage: producers

By Xola Potelwa

JOHANNESBURG (Reuters) - Platinum producers Anglo American Platinum, Impala Platinum and Lonmin said on Tuesday a strike now in its ninth week at their South African mines was causing irreparable damage to the sector and local economy.

Wage talks have broken down between the companies and the striking AMCU union, which is demanding a doubling of basic wages, although the world's top three platinum producers said they were open to talks "within a reasonable settlement zone".

In a joint statement, the companies said they had lost nearly 10 billion rand in revenues, but also pointed to the cost to communities around the mines in the platinum belt northwest of Johannesburg.

South Africa's biggest post-apartheid mine strike, which has hit 40 percent of global production of the precious metal, is also seen denting sluggish economic growth and widening the current account deficit as its effects ripple from the platinum communities throughout the wider economy.

"The financial cost ... does not tell the full story," the companies said. "Mines and shafts are becoming unviable; people are hungry; children are not going to school; businesses are closing and crime in the platinum belt is increasing."

South Africa's largest labour grouping COSATU, which includes AMCU's archrival the National Union of Mineworkers, said it supported the call for a "living wage" but accused the striking union of being irresponsible.

"We believe that it is irresponsible to take workers on such a long strike where there are no prospects of achieving the demands," COSATU said in a statement.

COSATU also said the government should intervene to resolve the impasse.

The mining companies have repeatedly stated they cannot afford the demand for a 12,500 rand monthly "living wage", saying many steps have already been taken to remedy historical inequalities in the sector.

South Africa's deputy president will meet with the mining industry and unions on Thursday for a regularly scheduled forum aimed at bringing stability to the sector.

It will be the first meeting between the companies and AMCU since wage talks collapsed almost three weeks ago.

The companies on Tuesday hinted at longer-term restructuring and mass layoffs in an industry that employs more than 100,000 people.

"Sadly, as the industry progresses towards greater mechanisation and higher skills levels, which are aligned with higher earnings and greater productivity, so the number of people employed in the industry will decrease," they added.

South Africa has faced chronic unemployment for over a decade, with one in four people out of work.

Miners near Rustenburg, the main town in the platinum belt, told Reuters last week they were having to sell cattle to make ends meet, while local business owners spoke of collapsing trade because many migrant workers had simply gone home.

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Hundreds rush to rural Chinese bank after solvency rumors: media

by Reuters

SHANGHAI (Reuters) - Hundreds of people rushed to withdraw money from a branch of a small Chinese bank after rumors spread about its solvency, reflecting growing anxiety among investors as regulators signal greater tolerance for credit defaults.

The case highlights the urgency of plans to implement a deposit insurance system to protect investors' deposits in case of bank insolvency, given that Chinese are growing increasingly nervous about the impact that slowing economic growth will have on the viability of financial institutions.

Regulators have said they will roll out deposit insurance as soon as possible, without giving a firm deadline.

Domestic media reported, and a local official confirmed, that ordinary depositors swarmed a branch of Jiangsu Sheyang Rural Commercial Bank in Yancheng in economically troubled Jiangsu province on Monday.

Bank Chairman Zang Zhengzhi was quoted as saying the bank would ensure payments to all the depositors. The report did not say how the rumor originated.

Why Yancheng investors suddenly lost confidence in the security of their bank deposits is not clear, given that the Sheyang bank is subject to formal reserve requirements, loan-to-deposit ratios and other rules to ensure they keep sufficient cash on hand to meet demand.

Bank failures in China are virtually unknown, as Chinese banks are considered to operate under an implicit guarantee from the government.

Finally, the central bank has eased up on money rates since February, and traders say liquidity in the interbank market -- where banks like Sheyang bank can tap short-term funds to meet depositor demand -- remains relatively relaxed.

"It's true that these rumors exist, but actually (the bank going bankrupt) is impossible. It's a completely different situation from the problem with the cooperatives," said Zhang Chaoyang, an official at the propaganda department of the Communist Party committee in Tinghu district, where the bank branch is located.

Zhang was referring to an incident that rattled depositors in Yancheng in January, when some local rural cooperatives -- which are not subject to the supervision of the bank regulator -- ran out of cash and locked their doors.

Local officials say several co-op bosses fled after committing fraud.

China's central bank governor said earlier this month that deposit rates are likely to liberalized in one to two years - the most explicit timeframe to date for what would be the final step in freeing up banks to set their own interest rates.

It is widely expected to introduce a deposit insurance scheme before liberalizing deposit rates to protect savers in case a freed-up market leads to major strains on smaller banks and alarms the public. Analysts also expect the controls on deposit rates to be lifted gradually. Is China's debt nightmare a province called Jiangsu?


Local and global investors in China have taken note of Beijing's recent decision to allow China's first domestic bond default by Shanghai Chaori Solar Energy Science and Technology Co Ltd in March. Officials have indicated publicly that they are not worried that more defaults will damage economic stability.

In the past, domestic bond issuers were routinely bailed out by local governments and banks, and the willingness of regulators to let Chaori miss interest payments negatively impacted rates in Chinese offshore credit markets.

More recently, media also reported a heavily indebted real estate developer in Zhejiang province was at risk of defaulting on 3.5 billion yuan ($565 million) worth of loans -- a situation that has yet to be resolved.

When contacted by Reuters by phone on Tuesday, an official at the Jiangsu Sheyang Rural Commercial Bank branch hung up, saying she was busy.

An official at the administrative office at Jiangsu Sheyang Rural Commercial Bank said the bank would publish a statement shortly. On its website, the bank says it is capitalized at 525 million yuan ($85 million) and had total deposits of 12 billion yuan as of end-February,

Officials at the Jiangsu branch offices of the China Banking Regulatory Commission (CBRC) declined to comment. The Yancheng branch of CBRC and the propaganda offices in Yancheng city and Sheyang county did not answer calls seeking comment.

($1 = 6.1888 Chinese Yuan)

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A new high for the Aussie?

By Erik Tatje

Australian Dollar (CME:ADM14)

The Aussie Dollar has been trending higher since late January and the currency appears to be on the verge of a new leg higher. Price broke above a previous high during yesterday’s session and the level that was previous resistance at 9069 has now become support for price. Both near term momentum as well as the intermediate term directional bias in this market remain positive and the highest probability opportunity appears to be on the long side of the Aussie. Continue to use the 9069 pivot as support going forward. Ideally, price should remain above this support pivot; however, in the event of a more significant pullback in the price of the Aussie, look to the 9009 – 9000 area to be the next zone of support. Until price breaks below the 8955 low on the chart, the directional bias will remain positive, and buying corrective pullbacks into support will remain a plausible strategy to implement in the Aussie Dollar.

Australian Dollar, 30-minute Bar Chart, eSignal

Natural Gas (NYMEX:NGJ14)

Natural Gas continues to look weak as price broke below the 4300 level yesterday before eventually finding support at the 4265 suppot pivot on the chart.  Price has has a bit of a corrective bounce off this level in the early mornign session; however, sentiment in this market remains bearish.  Look for the recent corrective rally to lose steam around the 4335 area on the chart. In the event that price is able to push above this level, the 4375 – 4382 resistance band is the next valid upside target. The directional bias in this market is lower and selling corrective rallies into resistance is a valid strategy to implement until price proves otherwise. Keep in mind that Natural Gas is in the process of rolling over from April to the May contract so look for volume in the April contract to dissipate as the week progresses.

Natural Gas 30-minute Bar Chart, eSignal

Cotton (NYBOT:CTK14)

Despite yesterday’s big sell-off in the Cotton market, the technical framework of price action in this market remains firm. Prices have been trending higher nicely for the past few months and the recent corrective pullback could present a valid opportunity for those bullish on Cotton prices to enter the market from a better price. The area from 90.41 – 90.83 appears to be a solid zone of support from which price seems to be respecting at the current time. Any further weakness in price would be expected to find support around 89.20 – 89.60 on the chart. The intermediate term higher high higher low structure will remain valid until a break below the low at 86.12. Although near-term momentum may be unclear, the longer term directional bias remains positive in the Cotton market.  The RSI showed an extremely oversold signal following yesterday’s big move, which is to be anticipated after a large sell-off. The question now for traders will be whether or not yesterday’s price active was merely a corrective pullback or the start of something bigger.

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Bio Tech could be impacted by “Eiffel Tower Power & Gravity!”

by Chris Kimble


The left side of Eiffel tower patterns are fun if long. The right side of Eiffel Tower patterns are not near the fun.... if one remains long. If one harvests longs at the peak or is short on the right side of the Eiffel pattern, that is a different story!

Eiffel Tower Power (right side) could well be felt if Bio Tech ETF (IBB) breaks support!

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How This Central Bank Bubble Ends

by Bill Bonner

Explaining the End

I sometimes get the feeling that somewhere across that huge puddle, in America, people sit in a lab and conduct experiments, as if with rats, without actually understanding the consequences of what they are doing.

  • Vladimir Putin, 4 March 2014

We promised to explain how it ends. The world, that is. The world we live in now. The one in the middle of a rapidly inflating central bank bubble.

First, we need to understand that this is a very different world from the world of the 19th and early 20th centuries. It is a world where central bankers play a role somewhere between con artists, mad scientists and God Himself.

They deceive and cheat. They conduct their experiments without any real idea how they will affect people. And they move almost every price in the world – sending investors, householders and business people all running in one direction.

Their experiments change not only prices quoted on the Big Board and the supermarket. They also change the physical world. Jobs are lost to machines that – without such low interest rates – would not have been built.

Monetary Fantasy

Those in the 1% are only as rich as they are today thanks to the Fed’s manipulations. America’s super-sized houses also are largely the result of the Fed’s 2002-07 real estate bubble. And many a mansion has been built in Aspen or the Hamptons with money from Wall Street bonuses, which wouldn’t have been possible without central bankers’ grand designs.

And China is the way it is today – with its gleaming towers, its mega-factories, its empty cities and clogged roads – largely because US officials made it easy for Americans to buy things they didn’t need with money they didn’t have.

Central bankers – along with central governments – have created a kind of monetary fantasy… which depends on ever increasing amounts of credit. But where can all this new money go? Real output can’t keep up with it. So prices must adjust. In the event, they bubble up … first one market, then another … first one sector, then another …

And after the bubble, what? The bust!

That’s what we’re waiting for. A bust in the biggest debt bubble of all time. When the credit inflation ball bounces off the ceiling, it produces an equal and opposite reaction in the other direction. Asset prices fall. This is deflation. It begins with asset prices … and then makes its way into consumer prices.

Making Volatility Your Friend

Most investors think they need to protect themselves from this kind of volatility. Academic studies show that more volatile stocks under-perform less volatile stocks – they call it the “volatility anomaly.” And it is obvious that if your stock goes down 50% you need 100% on the upside to get back to where you started. Losses and gains have “asymmetric” effects on your portfolio.

But at our small family wealth advisory, Bonner & Partners Family Office, one of our principles is that you need to “make volatility your friend.” Because volatility is not the problem. The real problem is risk. There is risk that you will buy the wrong investment at the wrong price. Then you’ll get whacked.

EZ money policies – low rates, QE, paper money – produce an apparent stability. As long as the money flows freely, even some of the worst businesses and the worst speculators can borrow to cover their losses. Stocks go up and up and up. It looks good. But it masks real risk. As the bubble in credit increases the risk of a major blow-up increases… until it becomes a certainty.

This is where volatility can be your enemy and your friend. Just as Fed policies have made stocks too expensive… the equal and opposite reaction of the financial markets will be to make them too cheap. (Stay tuned.)

So, there you have it. The first stage of “the end” will be a major selloff of stocks. At present prices, of course, they’ve got it coming anyway. But the implosion of the debt bubble and the collapse of asset prices are not likely to be the end of the story. Not as long as we have delusional activists running central banks and central governments.

Tune in tomorrow for the second stage of the end.

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Insiders Become Extremely Pessimistic

by Pater Tenebrarum

Nejat Seyhun's Take on the Flood of Insider Sales

It should be pointed out that insiders have been heavy sellers of stocks for quite some time. Insiders are almost always early, both in their buying and selling. This is no surprise, as by the very nature of the situation, they have an  informational advantage and are bound by legal constraints, which expresses itself inter alia as an often considerable lead time in their activities. If one tries to time one's investments by relying solely on insider data, one will often find one's patience taxed, since what is needed for the investment to produce a positive return is usually that other market participants begin to recognize what the insiders have known all along.

So what is the current situation? As noted at the beginning, insider selling hasn't just picked up recently – it has been quite heavy for a long time now. What makes the current situation remarkable is only that insiders haven't expressed this much skepticism about valuations for some 25 years, as Mark Hulbert reports. He has some interesting information on how the data on insider activity need to be parsed to arrive at actionable intelligence:

“Corporate insiders are more bearish than they have been in almost 25 years. That isn’t good news for the stock market, since these insiders — corporate officers and directors— know more about their companies’ prospects than the rest of us. In fact, you may want to take their pessimism as a signal to ditch some of your stocks or shift into industries in which insiders aren’t heavily selling, such as energy, financials and basic industrials. Just be aware that this record bearishness isn’t evident from many of the insider indicators that get widespread attention on Wall Street—those based on a ratio of insiders who are selling to those who are buying.

According to the Vickers Weekly Insider Report, published by Argus Research, which calculates a proprietary version of this sell-to-buy ratio, insider selling over the last eight weeks, relative to insider buying, is higher than average, but no higher today than it was one year ago—when the S&P 500 was poised to produce an impressive double-digit gain. And in late 2003, just as the 2002-07 bull market was gathering steam, the insiders’ sell-to-buy ratio rose to even higher levels than it is today.

But insider sell-to-buy ratios can be misleading, says Nejat Seyhun, a finance professor at the University of Michigan who has extensively studied insider behavior. That is because the government’s definition of insiders includes a group of investors whose past transactions, on average, have shown no correlation with subsequent market moves: those who own more than 10% of a company’s shares.

Though on rare occasions such a large shareholder also will be an officer or director, in almost all cases it will be an institutional investor—such as a mutual fund or a hedge fund. These entities are outsiders in all but name, and they have the least forecasting ability. For example, Seyhun found that far from being a laggard, the average stock sold by these largest shareholders actually outperformed the market by 0.7% over the subsequent 12 months.

For his calculation, Seyhun strips out the largest shareholders from the sell-to-buy ratio. Currently that adjusted figure shows a record level of insider bearishness. According to this measure, corporate officers and directors in recent weeks have sold an average of six shares of their company’s stock for every one that they bought. That is more than double the average adjusted ratio since 1990, which is when Seyhun’s data begin. One year ago, Seyhun’s adjusted ratio was solidly in the bullish zone, he says. And in late 2003, the ratio was more bullish still. The current message of the insider data “is as pessimistic as I’ve ever seen over the last 25 years,” he says.

(emphasis added)

We weren't aware of this 'large shareholder effect', but it certainly makes sense the way it is explained here. Whenever one looks at insider activity in individual issues, one does after all focus on what directors are doing as well. An exception to the 'large shareholder rule' is investment or divestment by a bigger company in the same line of business, which presumably must be regarded as meaningful as well. The fact that traditional insider data services fail to make the differentiation proposed by Mr. Seyhun may be one of the reasons why so far, phases of heavy insider selling have not meant as much as one might expect. However, as the report above indicates, things have now changed rather dramatically. Insiders could of course still be early. They are not necessarily stock price forecasters – they only have information about the performance of  the underlying business (obviously, stock prices and business performance can frequently be different cups of tea for extended periods of time).

Moreover, insiders are constrained when material information (such as a big earnings miss, news on the regulatory front, etc.) is about to be disclosed. So it is usually a judgment call about valuation, and often probably a hunch that either trouble or better times for the business are in the offing further down the road. A CEO or CFO might e.g. see some trends in the numbers the meaning of which he can judge from experience, but which do not rise to the 'material information' standard that bans trading activity prior to public disclosure.

According to Mr. Seyhun's methodology, the following sectors are currently experiencing the most determined and aggressive selling by company directors: capital goods, technology, consumer durables (i.e., automobiles, construction and appliances) and consumer non-durables (food and beverages, clothing and tobacco). As we have pointed out, we see the recent weakness in technology stocks as a warning sign, and the above observations about insider activity lend support to this hunch.

Our guess would be that corporate officers are mainly concerned about valuations at this stage, but one cannot rule out that they are aware of a subtle deterioration in business that will only become obvious to other market participants at a later stage.


The NDX has reached a new high for the move in early March, but since then is looking a tad wobbly. The past two trading days have seen sharp declines on heavy volume – click to enlarge.


XLY, the consumer discretionary ETF. This one has not diverged from the broader market, but it suffers from internal divergences – for instance, the stocks of car makers have failed to confirm the recent move to new highs in XLY – click to enlarge.


XRT, the retailer ETF. Note that it has now diverged from the SPX twice in a row – click to enlarge.

A More Hostile Fed

Monetary expansion and its lagged effects remain supportive factors for the market, but even there we see a reversal in trend and a far more hostile Fed.

Note in this context that every time a new Fed chairman/chairperson has taken over since Volcker in the late 1970s, monetary tightening was on the agenda. We suspect that most Fed chairmen are trying to bow out on a 'high note', this is to say, with money easy and the stock market elevated. By contrast, new chairmen are usually under pressure to prove that they are in agreement with the official 'inflation fighting' (ha!) orthodoxy of the central bank, and finding monetary conditions loose, begin to tighten in the early part of their stint as Fed chief.

It happened this way with Volcker, Greenspan and Bernanke, and only Volcker managed to dodge a stock market crash (although the 'double dip' recession in the early 80s was not a fun time for the stock market either). Ms. Yellen arrives on the scene with the market one of the historically most overvalued in history, a veritable mania in junk debt that absolute dwarfs anything that has been seen before in this asset class and with monetary policy the loosest of the entire post WW2 era. So our guess is, she isn't going to be able to dodge a crash either, the main question is when it will happen.


The list of signs suggesting caution is getting longer by the day. Caveat emptor, as they say.

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Why Good Numbers Matter for the Livestock Sector and How Decision Makers Can Improve Them

by TheCattleSite

Better data is needed in order for sustainable livestock growth strategies to be implemented appropriately, a new World Food and Agriculture Organisation (FAO)report has found.

Ugo PicaCiammara and Nancy Morgan, an agricultural economist at the FAO, write that growing demand for animal produce in developing countries requires more maths and science in food production.

The growing demand for food of animal origin in developing countries represents a major opportunity for poverty reduction, writes Nancy Morgan.

Livestock ownership is recognized as a significant contribution, and in multiple ways, to households’ livelihoods, including through the provision of cash income, food, manure, hauling services, savings, insurance and even social status.

This is the area covered in the FAO's latest report, Investing In the Livestock Sector: Why Good Numbers Matter.


The FAO's recent publication looks to address the myriad of challenges associated with generating useful livestock data.

In order to sustain and promote the livestock sector’s development, good quality data are needed for designing and implementing policies and investments. However, available livestock data, and the derived statistics, are largely considered inadequate for effective decision-making.

While a review of existing agriculture- and livestock-related datasets for African countries suggests that some livestock-related indicators do exist at the country level, they are few in number, are rarely collected on a regular basis, and their quality is often questioned by livestock stakeholders with regards to their timeliness, completeness, comparability and accuracy.

There is often limited institutional collaboration between data collection agencies and furthermore, statistical systems rarely, if ever, generate data on pastoral production systems, which are of considerable relevance to many African countries.

In an effort to address the myriad of challenges associated with generating livestock data useful for decision makers, the Livestock in Africa: Improving Data for Better Policies Project was developed.

The Project was implemented between 2010 and 2013 by the World Bank, the UN Food and Agriculture Organization (FAO), the International Livestock Research Institute (ILRI), and the African Union, in collaboration with the pilot countries of Uganda, Tanzania and Niger, and with financial support from the Bill and Melinda Gates Foundation. One of the main goals of this collaborative initiative has been building the capacity of national governments to collect better quality livestock data and using this to guide investment decisions for the livestock sector.

At the conclusion of the Project, a Sourcebook was produced--Why Good Numbers Matter: A Sourcebook for Decision Makers on How to Improve Livestock Data. It summarizes the project’s lessons learned and presents possible solutions to the challenges facing professionals in the public and private sectors collecting and analyzing livestock data.

In particular, the Sourcebook: (i) develops a framework for and presents tools and methods on how to improve a livestock statistical system; (ii) identifies the core livestock indicators needed by decision makers; (iii) provides guidance on improving the content of household and farm level survey questionnaires; (iv) presents examples of methods on how to improve livestock data; and (v) provides practical evidence on how country governments could use data for the proper formulation of policies and investments.

At the minimum, the report recommends that national governments collaborate to develop a set of core indicators targeting the production, social and environmental dimensions of agriculture for five core livestock items--cattle, sheep, pigs, goats and poultry, as they contribute to more than 99 percent of meat, milk and egg production across Africa. Such data is critical to help decision makers identify the constraints faced by different livestock stakeholders and develop policies or make investments that aim to relax or remove such constraints.

When developing these core indicators, regional and international collaboration is critical, emphasizes the Sourcebook, as it enables data integration across countries, regions and continents. For example, current practice for collecting data on milk production is sometimes based on gross data, which includes the milk sold and that suckled by young animals, or net data, which excludes milk suckled by young animals.

Similarly, data on livestock value added in some cases does include manure as one of the outputs of livestock, but in others it does not. Recommendations in the Sourcebook on how this could be achieved include, for instance, developing international standards and classifications, a common data platform at the regional and pan-African level, and an integrated survey framework based on best practices identified in survey design and implementation.

Furthermore, collaboration within national governments is important to ensure that other social and economic surveys, such as the Living Standards Measurement Surveys, include questions about livestock. This will show how livestock contributes to household livelihoods and for designing policies and investments that maximize the sector’s impact on poverty reduction. For example, one study cited in the Sourcebook (Benin et al., 2008), found that a one percent increase in livestock GDP per capita was anticipated to reduce national poverty by 0.34 percent.

To help stakeholders involved get started in improving these livestock statistical systems, the Sourcebook includes a table of recommended core livestock indicators for Sub Saharan Africa, along with the recommended frequency of their collection, and level of representativeness (i.e. regional, national, district or lower administrative level).

It also presents a short, a standard and an expanded version of a livestock module for agricultural surveys and for multi-topic surveys. The three versions of the module are starting points for countries to develop templates that fit their specific needs. So far, through collaboration with the WB’s LSMA-ISA project, Niger, Tanzania and Uganda have used it to improve the livestock content of their questionnaires.

The livestock module, as well as the development of integrated indicators and survey frameworks, are among the several recommendations detailed in the Sourcebook to improve countries’ quantity and quality of data on livestock numbers. Additional recommendations include, for example, methods for addressing challenges with collecting data in nomadic areas, which requires different survey tools such as satellite imagery and spatial analysis techniques.

Though the risk of designing bad policies and investments can never be entirely eliminated, a statistical system that generates data on core livestock indicators and some other ad hoc indicators, complemented by consultations with experts and rigorous pilot projects, can assist decision makers in designing and implementing policies and investments that are more effective in promoting a thriving and sustainable livestock sector.

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Corn returns to resistance, while wheat and soybeans close higher

By Allendale Inc

Corn: Bulls arrived early to help push the corn back up to resistance levels on Monday. While most corn news was quiet, there was some spillover support from wheat again. When trade ended last week, there was a forecast for major rains in the HRW areas, most of which were removed Monday, offering support to wheat and corn support.

With the upcoming stocks report just a week away, there is solid reason why old-crop corn traders would want to be light buyers anyway. Corn has already rallied well on strong sales reports all year long but Monday could show corn bulls that we have less corn on hand than we thought. Right now it is only a guess what we will see next Monday, but bulls will likely be happy to pre-buy going into the report. Bears should remain in the new-crop contract.

Yet another widely watched forecaster mentioned the need to watch the quickly building El Nino probability. He went as far as to say that these conditions have not been seen since 1997. Looking back to how December traded in 1997, it is interesting to know that the chart appears almost identical to our current December chart. So, what happened going forward? In ’97, the December corn topped on April 1 and fell 24% into July. While there was a bounce found after that by the end of the contract corn was still off 15% from the April 1 high…Ryan Ettner

Soybeans: The week’s trading stated out on a positive note as Friday’s sellers seemed to turn into today’s buyers. The day’s trade volume could be called moderate at best. New information to trade was lacking with spillover support from the strong day in wheat and corn providing the best support for the market.

There continues to be talk within the industry that China is doing its best to get out of bean purchases as well as try to resell its buys into the United States. The problem for the trade is there is still no confirmation yet to how many bushels have been canceled or sold into the United States. The latest rumor is that 10 or more cargoes of Brazil soybeans are headed to U.S. shores. These were ordered by Chinese buyers months ago but due to sharply lower demand, they are trying to find someone else to take the product.

U.S. prices currently have almost a $50 per tonne premium over Brazil. Today’s beans inspections came in at 732,132 tons, which was viewed a little negative as the trade was expecting inspections to come in closer to 770-925,0000 tons.

AgRural estimated Brazil’s crop at 86.0 mmt and that 63% of the crop had been harvested. Last year 60% of the crop had been harvested at this time. Safras e Mercado said 67% of the Brazilian bean crop has been harvested. Funds were an estimated buyer of 6,000 beans today.

Next Monday, the USDA will be releasing both the quarterly stocks report as well acreage report. The quarterly Grain Stocks is a survey of grain holders revealing how much grain is left over after the second quarter of usage. USDA will use this report to evaluate the unknown demand in the grain industry and then use this information to make adjustments on upcoming monthly WASDE reports. The Prospective Plantings report is the first official survey of farmer expectations for this spring. Traders should use caution as we get closer to the reports as the release of these reports tends to lead to dramatic moves one direction or another…Jim McCormick 

Wheat: Wheat finished the day higher Monday as we made a push to test the recent highs amid buying on concerns that the Russia and Ukraine standoff doesn’t appear to be getting any better.

We saw good buying enter the market overnight around the time the European markets opened and continued to find strength through the trading session. We failed to move into new highs for the move but we did still have a strong day on moderate volume for the move. This break in the market was enough to push us below the recent uptrend line but the break was not enough to convince trade to liquidate additional long positions.

Managed money added longs last week bringing their total to about 25,000 positions, up 13,000 week over week. We could see these longs add additional longs if we do break into new highs and with the lack of precipitation to relieve dry conditions in the plains and a Ukrainian Russian situation continuing to escalate we wouldn’t expect a mass liquidation of longs based on these two issues.

We do have a quarterly grain stocks report on Monday which could affect these markets on Thursday and Friday. Look for resistance near the recent highs but a breakout suggested the longs are still firmly in control of this market.

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10-year Treasurys fall as curve steepens

By Ben Eisen

NEW YORK (MarketWatch) — The 10-year Treasury note yield rose Tuesday, snapping a two-day drop as appetite for risk returned to the capital markets.

The benchmark /quotes/zigman/4868283/delayed 10_YEAR +0.29%   yield, which rises as prices fall, rose 1 basis point on the day to 2.746%, as investors left haven Treasurys for riskier assets. Stocks opened higher and the dollar strengthened.

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“It’s the unwinding of curve flatteners due to equity and U.S. dollar strength,” said Thomas di Galoma, head of fixed income rates at ED&F Man Capital Markets, in e-mailed comments.

Tuesday’s moves reverse shifts in the Treasury market as investors priced in earlier policy rate hikes from the Federal Reserve, following a meeting last week that left markets with the impression that the central bank could cut off the flow of cheap borrowing sooner than expected.

Following the Fed meeting, the intermediate-term Treasury yields most sensitive to shifting Fed policy rose sharply while long-term yields fell, pushing the difference between them to its lowest point since 2009. That’s an indication that markets were moving forward with their rate hike expectations. However, the market reversed course Tuesday.

The 5-year note /quotes/zigman/4868109/delayed 5_YEAR -1.44%  yield fell 2 basis points to 1.717%, while the 30-year bond /quotes/zigman/4868063/delayed 30_YEAR +0.87%  yield rose 3 basis points to 3.602%. The differential, or spread, rose to 1.89 percentage points from 1.84 percentage points on Monday.

Charles Plosser, president of the Philadelphia Federal Reserve Bank, said Tuesday morning that last week’s meeting did not reflect a fundamental shift in the central bank’s policy, and that he was “a bit surprised” by the market reaction. He said he sees the Fed funds rate at 3% by the end of 2015, after correcting an initial error on-air with CNBC. While Plosser’s comments were taken as positive for stocks, the Treasury market wasn’t as convinced.


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“The Fed seems to be ahead of reality here,” said di Galoma, adding that Plosser’s comments were taken with a grain of salt.

Treasurys pared losses after a round of economic data. New home sales dropped 3.3% in February to an annual rate of 440,000, matching economist expectations. Consumer confidence rose to 82.3 in March from an upwardly revised 78.3 in February, according to Conference Board data on Tuesday.

The S&P/Case-Shiller’s 20-city composite index of home prices fell 0.1% in January, marking its third straight month of drops on the back of cold winter weather. On a seasonally adjusted basis, the index showed a rise of 0.8%. The Federal Housing Finance Agency said its data showed a 0.5% rise in prices in January.

An auction of $32 billion in 2-year Treasury notes /quotes/zigman/4868354/delayed 2_YEAR -2.67%  is at 1 p.m. Eastern.

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