Friday, May 11, 2012

Marc Faber Says 1987-Like Crash is Fast Approaching Unless Fed Brings HUGE QE3

from Silver Doctors:
Marc Faber was on Bloomberg this morning, and stated that the US faces a massive 1987 like crash without huge QE3 by the Fed.
We agree completely…if it weren’t for the fact that the Fed never stopped quantitative easing…just the official announcement of it temporarily. The Fed has purchased 62% of all treasury issuances over the past 12 months – ongoing QE is a FACT. QE will continue to infinity…AND BEYOND.
As Faber states, the alternative is disaster of unmitigated proportions.

Low-Risk Bond Fund Provides Tax-free Income

PowerShares Insured National Municipal Bond Fund (NYSE:PZA) — This Morningstar 4-star rated municipal fund provides an exemption from federal income tax and has a yield of 4.34%.
Several years ago, there was fear that many states would default on their bonds. That proved to be an overreaction. Default rates have been very low, with few surprises. Only those bonds with poor records continued to have poor records. Thus, tax-free bonds of a long-term nature are being gobbled up by savvy investors, and this fund holds only bonds of at least a 15-year maturity.
Technically the fund is in a low-risk bull market having held at its bullish support line for over 16 months. It recently broke a double-top indicating that it will likely continue to appreciate while at the same time produce higher-than-average rates of tax-free income.
PZA Chart

Oversold Stocks Piling Up

Although the S&P 500 is down less than 5% from its bull mar­ket highs, the per­cent­age of stocks that are over­sold is really start­ing to pile up.  Using a bound­ary of one stan­dard devi­a­tion above or below the 50-day mov­ing aver­age as the thresh­old for being over­bought or over­sold, 49.4% of the stocks in the S&P 500 are now con­sid­ered over­sold, while just 19.0% of the stocks in the index are over­bought.  The chart below shows the daily per­cent­age of S&P 500 stocks that are over­bought and over­sold.  As shown in the chart, the cur­rent level of 49.4% is the high­est per­cent­age of over­sold stocks in the index since 10/3/11.

S&P Opens The Pandora’s Box: The Wall Of Refi Worry Is $46,000,000,000,000 Tall

from Zero Hedge:
In what S&P calls a ‘Perfect Storm’, the next four years will see a minimum of $30 trillion in companies’ refinancing needs related to maturing bonds and loans and further they expect $13-$16 trillion more debt will be required to finance growth. With bond portfolios over-stuffed with corporate debt (since angst over sovereign risk has skewed asset allocation away from that cohort) the rating agency is concerned that ongoing bank deleveraging, these huge debt re-funding requirements, and the diminishment of central banks and governments to do anything about it leave serious problems with a credit overhang so large. Critically, especially as we hear calls for ‘growth’ plans from Europe, is the increasing likelihood that, as Reuters reports, this will potentially influence corporate credit quality and “alter the fragile equilibrium that currently exists in the global corporate credit landscape”. While S&P expect the refinancing needs may well be met “This global wall of nonfinancial corporate debt will potentially compound the credit rationing that may occur as banks seek to restructure their balance sheets, and bond and equity investors reassess their risk-return thresholds” which “raises the downside risk in global markets” as an inability to finance growth may well be the catalyst for another risk flare.
Read More @ Zero

As Oil Slumps and Natural Gas Rises, Are MLPs a Bargain or a Trap?

At a time when investor appetite for stocks is understandably weak, many traders are taking on a more defensive stance by moving into safer stocks and sectors or by trying to pad returns with some yield.
For Darren Schuringa, co-founder of Yorkville Capital Management, the latter is true, especially since he specializes in one thing: Master Limited Partnerships (MLPs). His firm recently launched an ETF, the Yorkville High Income Fund (YMLP), which offers about an 8.7% yield, growing distributions, and enviable long-term growth.
"If you look at our 10-year track record, we've delivered 10% per annum of outperformance over the S&P 500," Schuringa says in the attached video clip. He points out that the average distribution (that's the MLP equivalent of a dividend) grew by 10% in the first quarter.
To be sure, 2012 has been a rough year for commodities and MLPs, and with the exception of natural gas, both have lagged the stock market. However, Schuringa explains, "there's very low correlation to the price of the underlying commodity—oil or natural gas—and the growth of the distributions," adding that as long as those payouts are steady or rising, the share prices will ultimately catch up.
"It's really just identifying those companies that do not cut distributions," he says.
As an asset class, the MLP and PTP (publicly traded partnerships) universe is currently valued at about $300 billion and has about 100 members, 80% of which are energy-related. As for the Yorkville High Income Fund specifically, Schuringa says it focuses exclusively on four types of commodity-based MLP's: oil and gas rigs; timber and fertilizer; propane; and marine transportation.
With the S&P 500 yielding about 2.2%, the paid-to-wait appeal of MLPs that pay north of 6% is obvious. This explains why Schuringa's fund has been among the most successful new ETFs of the year (in terms of trading volume).

A Chinese Company Might Soon Own a Lot of U.S. Movie Theaters

The New York Times reports today that AMC Theatres, America's second-biggest movie theater chain, may soon be purchased by a Chinese company, the Wanda Group, which, as one of the biggest theater operators in China, is no stranger to the Chinese government's longstanding practice of censoring American movies. So what happens if they come to own such a large part of the American movie market?

 The movie industry is booming in China, and this would be the first significant expansion it has made into the States. And while there have been plenty of Chinese companies that have bought big American ones -- Lenovo gobbled up IBM's personal computer business -- this might be the first time a Chinese company became a player in the U.S. entertainment and media sector.

 There's no deal yet -- The Times says the talks are, for now, just talk -- but "according to people briefed on the discussions," the Wanda Group could buy or take a large stake in AMC, which is valued around $1.5 billion, from its current owners, a collection of financial firms including Apollo Investment Fund, J. P. Morgan Partners, Bain Capital Investors, the Carlyle Group. All parties are, no doubt, practical minded businesspeople, but one thing that private equity firms rarely have to deal with is Chinese censors' complaints about Hollywood movies. Wanda, as a successful theater operator, presumably has, and it seems like a situation ripe for professional awkwardness if Wanda were to show a censored version of a film in its Chinese venues while the unedited film plays at its American houses. (more)

Chart of the Day - Walt Disney (DIS)

The "Chart of the Day" is Walt Disney (DIS), which showed up on Thursday's Barchart "All Time High" list. Disney on Wednesday posted a new all-time high of $45.80 and closed up 1.63%. TrendSpotter just turned Long on Tuesday at $44.30. In recent news on the stock, RBC Capital on Wednesday reiterated its Outperform and raised its target to $50 from $45, citing the likelihood that its successful Avengers film will spark strong sequels and boost the momentum of other Disney movies and character franchises. Disney on Wednesday reported Q2 EPS ex-items of 58c, above the consensus of 55 cents. Disney, with a market cap of $78 billion, is a diversified worldwide entertainment company with operations in five business segments: Media Networks, StudioEntertainment, Theme Parks and Resorts, Consumer Products and Internet and Direct Marketing.