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  • Germany is likely in recession and Draghi has few policy choices left

    Posted by Larry Berman

    Germany is likely in recession given the July retail sales report following the negative growth already scene in Q2. The German finance minister (Schaeuble) said that Draghi has few policy choices lef...

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  • Germany is likely in recession and Draghi has few policy choices left
    Posted by Larry Berman on 
    Friday, August 29, 2014 9:17 AM

    Germany is likely in recession given the July retail sales report following the negative growth already scene in Q2. The German finance minister (Schaeuble) said that Draghi has few policy choices left to help and that the governments of the EU need to have policy reforms to stimulate growth. That means no austerity and growing debt to GDP ratios. With Spanish and Italian bonds trading at lower yi...

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  • The S&P looks like it is failing the 2000 test
    Posted by Larry Berman on 
    Thursday, August 28, 2014 10:34 AM

    Further to our comments yesterday, the S&P looks like it is failing the 2000 test (for now). To confirm this, we would need to see a close below 1983 and ideally with over 2150 net decliners on the NYSE according to breadth analysis from Tom McClellan. Tom suggests the breadth statistics on this advance are weak and likely point to a reversal into the seasonal weakness often seen in September—...

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  • The S&P 500 at 2000 should struggle to reach new highs
    Posted by Larry Berman on 
    Wednesday, August 27, 2014 3:42 PM

    Psychologically, the S&P 500 at 2000 should struggle to make a clear break to new highs. First, the trailing PE on the market is now 18x, not that it’s much different than 17.6x from a few weeks ago when the market pulled back, but it’s the psychology of the round number hurdle. On a forward basis, the market is trading at 15x 2015 earnings, which sounds cheap if we get a Goldilocks scenario a...

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  • The Fed will eventually raise rates and the jury is out as to when
    Posted by Larry Berman on 
    Monday, August 25, 2014 3:22 PM

    After reading a few inches worth of analysis from Jackson Hole, the conclusion is that the Fed will eventually raise rates and the jury is out as to when. The ECB will execute a QE package at some point soon. We knew that going in, so there were not too many surprises. The FOMC is torn between timing and scope. Shrinking the balance sheet will take years. Easy money is here for a long while and so...

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  • Seasonals are distinctly bearish into early October
    Posted by Larry Berman on 
    Wednesday, August 20, 2014 10:40 AM

    Seasonals are distinctly bearish into early October. A failure to make and hold new highs by early next week (read after we hear from Yellen and Draghi), should give the complacent bulls another gut check taking out recent lows and running the 200-day average pretty hard. A dip back below unchanged for the S&P 500 at 1848 could really do it to the psyche of the bulls. That type of move could s...

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  • We expect this correction to play out longer and for one more leg lower
    Posted by Larry Berman on 
    Tuesday, August 19, 2014 11:08 AM

    Back in the S&P 500’s April dip, the recovery took almost two months to make a new high. We expect this correction to play out longer and for one more leg lower over the next few months. It is hard to forecast markets at the best of times (Nate Silver, Nassim Taleb), but it’s increasingly difficult during the dog days of summer when volume tends to dry up. Many are waiting for key speeches fro...

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  • The futures market is indicating strength
    Posted by Larry Berman on 
    Monday, August 18, 2014 2:40 PM

    The futures market is indicating strength so far this morning as Europe bounced back following the US Friday afternoon. Big picture, Russia-Ukraine is not fixed and there are more chapters to that story. This week, some excitement over a dovish Yellen speech and potential for another all-in speech from Draghi could keep the markets stoked. Fundamentally, the world is not fixed. We could argue that...

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  • A big revision from Stats Canada on the employment report
    Posted by Larry Berman on 
    Friday, August 15, 2014 10:48 AM

    The big revision from Stats Canada on the employment report suggests the Canadian economy is not sucking wind as much as it did last week, but it does not likely change the path to a weaker Canadian dollar over the balance of the year and into whenever the Fed actually hikes rates. We believe that will be way later than the market expects and perhaps not for years. Gold looks to be failing again o...

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  • The percentage of TSX stocks in a consolidation pattern has risen
    Posted by Larry Berman on 
    Thursday, August 14, 2014 1:29 PM

    You know our thesis on the TSX for the next few months. Energy and banks weaken 5% or more. We have already seen it starting in the energy sector. Banks start to report in two weeks, it may take that long to begin. The stability in the markets this week is likely a false start. We put the odds of that at 80%. Nothing is guaranteed. We do note that the speculators are significantly short of natural...

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  • The smart money is getting ready the markets without Fed liquidity
    Posted by Larry Berman on 
    Wednesday, August 13, 2014 3:07 AM

    We read recently that Goldman is structuring asset swap credit baskets to help institutional investors short leveraged loans, high yield bonds and subprime sovereign bonds. Last week we sold a huge position in high yield bonds (to move to high grade short duration corp bonds), which our custodian had lent out to shorts (standard practice of custodians) and they have been having trouble sourcing mo...

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