Archive for 2011
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Morning News: August 12, 2011
Eddy Elfenbein, August 12th, 2011 at 6:55 amSurging Yuan May Signal Boost For Global Recovery
Short-selling Ban Spurs Tentative Recovery
French Economy Stalls With Decline in Consumer Spending as Exports Dwindle
Italy Cabinet to Meet on Austerity Bill
Portugal Receives Bailout Endorsement
Stocks Climb in Europe as U.S. Index Futures Advance
Small Investors Recalibrate After Market Gyrations
Bernanke Borrows From Carney’s Stimulus Playbook With Interest-Rate Pledge
First-Time Jobless Claims in U.S. Unexpectedly Decrease to Four-Month Low
Citadel Chief Gives Up Dream for Investment Bank
Hong Kong Telecom Giant PCCW’s Profit Rises 8% on Mobile, Pay-TV Profit
Machinist Union Prevails at United
Bank of America Chief Sees Top U.S. Officials
Zynga Restates Sales on Accounting Change
Joshua Brown: Big Bounce, Gold and Bonds Give a Bit
Howard Lindzon: Excess Supply is a Bitch …. Don’t Trust Demand… and Risk Management Rules
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Intrade: Democrat to Win in 2012 = 49.9%
Eddy Elfenbein, August 11th, 2011 at 4:00 pmFrom Intrade, the latest futures price for a Democrat to win next year’s presidential election dropped to 49.9.
For a Republican to win, the contract is 46.7.
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10-Year TIPs Yield = 0%
Eddy Elfenbein, August 11th, 2011 at 2:16 pmAmazing.
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S&P 500 Nears Death Cross
Eddy Elfenbein, August 11th, 2011 at 1:27 pmThe S&P 500 is very close to reaching a “Death Cross.” This is when the 50- and 200-DMA cross.
This time, the 50-DMA is set to fall below the 200-DMA which technicians consider a signal of more bearishness ahead.
Last summer, the 50-DMA was below the 200-DMA from July 1 to October 21. Bear in mind that the S&P 500 rose 15% over that time so this is hardly a perfect indicator.
The key number for today is 1158.84. If the S&P closes above that, the 50-DMA will still be above the 200-DMA.
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The Notch In the Yield Curve
Eddy Elfenbein, August 11th, 2011 at 11:22 amThis is an important point but it’s difficult for me to explain so please bear with me. Below is the current Treasury yield curve. The key part is the notch that extends out about three years (I added the red line to highlight the area). The blue line is pretty flattish and doesn’t start to rise until 2014 or 2015.
Embedded in any yield curve is a prediction of where short-term interest rates will be in the future. The steepness of the blue line indicates how quickly rates will rise.
What’s happened recently is that the market doesn’t expect rates to rise for some time. This is a direct response to the Fed’s throwing the towel announcement from earlier this week. In turn, this has led investors to crowd into gold.
Normally, a steep yield curve is very good for stocks (and banks). The problem is that steepness doesn’t really start on the yield curve until about three years out.
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Will They Ever Learn?
Eddy Elfenbein, August 11th, 2011 at 10:37 amOnce again, regulators consider a bad idea that refuses to die:
Europe Considers Ban on Short Selling
BRUSSELS — A European market regulator is considering recommending a temporary ban on negative bets against stocks across the Continent in an effort to stop the tailspin in the markets.
The European Securities and Markets Authority, a body that coordinates the European Union’s market policies, has been requesting information from member states about such bets against stocks, known as short-sales.
In such deals, a trader sells borrowed shares in hopes that they will decline in value before he has to buy them back to close out his loan. The difference in price is his profit, or loss. Critics say short-selling encourages speculation and pushes stock prices down, sometimes feeding on itself in a panicked market, while advocates say it keeps the market honest and maintains liquidity.
“We are discussing with national authorities and together we will decide whether we need coordinated action,” Victoria Powell, a spokeswoman for the authority, said Thursday. She declined to comment on the timing of any decision or its possible scope.
Short-selling is crucial to an orderly market. It’s difficult to over-state how important this is. Shorting is what gives a trader his power. It’s an energy field created by all tradeable securities. It surrounds us, penetrates us, and binds the markets together.
Short-selling is most important right now because it helps the market uncover the weakest firms. I find it interesting that regulators continue to blame short-sellers. The fact is that regulators overwhelmingly failed in finding problem spots in the economy and that’s exactly what the shorts did.
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Understatement of the Year
Eddy Elfenbein, August 11th, 2011 at 10:16 amLadies and gentlemen, I hope you’re sitting down:
In other news, Napoleon concedes that invading Russia “may have been a bad idea.”
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Dividend Yields on S&P Financial Stocks
Eddy Elfenbein, August 11th, 2011 at 9:39 amFinancial stocks have been getting battered and bruised. The Financial Sector ETF ($XLF) was over $17 earlier this year. Now it’s at $12.
Here’s a look at how some the dividend yields stack up:
Eddy Elfenbein is a Washington, DC-based speaker, portfolio manager and editor of the blog Crossing Wall Street. His