Monday, January 25, 2016

Market Worry Spurs Safe Haven Buying

The S&P 500 Index continued its downward trending Monday,closing down 29.82,or 1.56%.This was based on the decline of light sweet crude below the 30.00 mark,down 2.42% to 29.77 a barrel.Brent crude fell even harder,down 6.62%,but didn't crack the 30.00 threshold,closing at 30.05.Safe havens gold and silver both appreciated,with gold closing at 1108.8 an ounce,up 1.1%;and silver closing at 14.255 an ounce,up 1.444%.*
There is a lot of concern in the markets over the devaluation in China and the collapse of oil,said Bob Baur of Principal Global Investors.We think a huge devaluation is not ahead.I think China is more interested in a stable currency rather than devaluation.We're finally seeing some stability in the commodity markets.We do think 30.00 is low for oil prices.*
Overall,we're not seeing the kind of consumer spending we were expecting.Lending is going up,but consumers are still reducing their spending.China has slowed dramatically,so there's a real concern about growth slowing.There's an awful lot of worry about a global recession.We think growth is being rebalanced.We are in a place where growth is not going to be what it was.The engine is there-it's just not going to be what we're used to.*
We've recapitalised the banks.Private and household debt has come down.Private debt has come down since 2005.*
Australia is doing remarkably well.The job growth there is good.The US economy has been resilient.Consumer spending is robust.It's awfully hard to see a recession occurring there,Mr.Baur noted.*
In the short-term,we could see some short-term rebound;but long-term,we are still bearish over the next 12 months,cautioned Jason Low,equity strategist at DBS Private Bank.*
Market Vectors Gold Miners ETF (GDX),Silver Wheaton Corp (SLW)

Monday, January 18, 2016

Market Fears:It Could Be a Long Way Down

Major global markets largely continued their decline on China and oil collapse fears Monday,although US stock exchanges were closed for the Martin Luther King,Jr. Day holiday.The one exception was the Shanghai Composite Index,which rose 0.47%.The Japanese Nikkei slumped 1.45%,approaching bear territory along with the Australian ASX.The Hong Kong HSI tumbled 1.45%.In Europe,the German DAX fell 0.25%,,while the London FTSE dropped 0.42% and the Paris CAC 40 lost 0.49%.In the commodities space,light sweet crude was down 1.63% and Brent lost 0.55% in anticipation of Iranian production re-entering the market.Natural gas was cheered,however,by the arctic outbreak sweeping into the US East Coast,rising to 2.124,up 1.14%.Gold was virtually flat at 1088.90 an ounce,just a hair down at -0.17%;but silver climbed to 13.94,or 0.32%.
I think there's much more to go,said Bill Fleckenstein,president of Fleckenstein Capital.My real fear is,there's going to be a dislocation,when the market breaks hard and fast.So far this year,it's been sort of a rolling dislocation.I think it's entirely possible to take out the lows of last summer,accelerate and go lower until such time as the Fed panics.*
Intel has been held up by slowing data centre growth.They've got tons of capacity in the place.If people start to waffle over growth,they'll really be in trouble.The world economy is weak.It's a very potent mix and the Fed can't help unless the market goes much lower-so guess what?The market's going much lower.This is much worse than a market correction.I think all these things are in a feedback loop and it's going to get much worse,Mr.Fleckenstein warned.*
iShares Silver Trust(ETF) (SLV)

Monday, January 11, 2016

Alcoa Launches Q4 Earnings Season - not dependent on China

In accordance with tradition,Alcoa has reported its Q4 2015 earnings first.Earnings per share were 0.04 versus the estimate of 0.02,a slight beat;while revenue came in at 5.25 billion dollars versus the 5.29 billion estimate,a bit of a miss.The company says it exceeded productivity goals,however.It expects continued strong demand for aluminum and strong global aerospace sales.Indeed,it is planning to spin off the aerospace business in 2016,so will implement the overhead reduction program this year.*
It's been really a solid quarter,said Alcoa CEO Klaus Feldman.We've seen a string of large contracts.We've doubled our auto shipments over the past year.Look at the cash;look at productivity-all this we've got under control.We have five different businesses.We're building up our bauxite business.We have an energy business.Today we're in a trough,and we're still doing well.We have 1.9 billion in cash and we believe global demand will rise by 6.9%.Aluminum is a hot metal.*
How is the China downturn affecting Alcoa? We are not dependent on China.China has opportunities,rather than threats for us,Mr.Feldman explained.*
Some part of this 15% drop in China is domestic;but part is fundamental,added Timothy Moe,chief Asia equity strategist at Goldman Sachs.The fundamentals are:
a.concerns about growth;and
b.concerns about the depreciation of the currency,the renminbi.
Any concern that growth is slowing is a real fundamental read-across,Mr.Moe observed.*
Alcoa Inc (AA),Goldman Sachs (GS)

Monday, January 4, 2016

As Market Falls,Fed Banker Explains China Slowdown,US Prospects-plus how many rate hikes in 2016

A slowdown in Chinese manufacturing in December,coupled with fears of intensifying conflict between Iran and Saudi Arabia,left global markets in a tailspin Monday.The Caixin/Markit China Manufacturing PMI fell to 48.2 in December from November's 48.6,the 10th straight monthly decline.A reading below 50 indicates contraction of the sector.The Reuters consensus estimate for December was 49.0.In response to the China index and the exogenous event in the Middle East,the S&P 500 Index fell 31.28,or 1.53%.Opinions on Wall Street were split over how significant the slippage was for the 2016 outlook.*
For San Francisco Federal Reserve Bank President John Williams,who spoke to CNBC at the American Economic Association annual conference,it's important to realise China is undergoing a pivot to slower growth,and a pivot away from manufacturing to the consumer sector.I think this is an ongoing process that China is going through,Mr.Williams said.We realise we're in a global economy and we're affected by it.The Chinese stock market is not a major concern as far as systemic risk right now.What we need to do is,focus on maximum employment and price stability.We're focused on the attainment of our objectives.*
We're in very good shape.Unemployment is at 5% and GDP growth is a little over 2%.We're a little ahead of the pack in getting back to full employment and on a sustainable path.Where we're being hit hard is on our net exports,a significant part of our economy.Inflation is one thing we're still struggling to get up to our goal of 2%.We're on a pace to add continued job gains.That's very positive for the economy-a growth path of 2-2.5 GDP and unemployment edging back down to 5%.*
There are always unforeseen events:the dollar,oil prices.I have a medium-term outlook.I want to focus on what's happening over the next 2-5 years.I'm not concerned about the ups and downs of market moves.We have a capitalist system and that's what happens.We're on a growth course that would lead to 3-5 Fed rate hikes in 2016,Mr.Williams projected.