Friday, August 20, 2010

Southern California home sales collapse by 21 percent year over year. Real estate tanks simultaneously with ending of government artificial market int

As would be expected, home sales in Southern California have collapsed in near synchronization with the ending of tax credits and tighter lending guidelines. The July sales figures fell on a year over year basis by 21.4 percent. This is a significant drop in a summer month that usually has solid home sales. This is the proof that the market is merely being held up by massive government intervention and incredibly expensive tax credits that serve really no purpose except to provide a short term sugar high for the market. The size of the decline resembles the declines we saw during the inflection point of the bubble bursting. As you will see in the next chart, home sales always collapse first and then prices follow. This is how the market reacts to imbalances and many cities in Southern California are still largely in housing bubbles. The market is essentially saying that home prices are too expensive without government subsidies. It is also the case that the job market is incredibly weak even after all the bailouts and stimulus that have been injected. Let us examine the Southern California sales pattern first. (more)

3 Stocks Priced for Corporate Buyouts,
The value of this year's worldwide mergers and acquisitions topped $1 trillion earlier this month, according to data compiled by Bloomberg. That's a modest pace, compared with the frantic deal-making of 2006 and 2007, when full-year M&A volume topped $3.5 trillion and $4 trillion, respectively. However, it represents a 10% increase over the same period a year ago, and activity has been heaviest in recent weeks, suggesting the remainder of the year might be a busy one for takeover advisors.
The companies below turned up recently in a stock screen for attributes that might appeal to corporate suitors. Their takeover prices (stock value, net of cash and debt) are low relative to their core earnings power (profits not including interest, taxes and accounting charges related to past investments). They generate ample free cash for their size. Also, their corporate overhead seems high as a percentage of their sales – a sign of cost savings waiting to be wrung out. (more)

$102 Billion In 2,5 And 7 Year Treasuries On Deck For Next Week As Fed Prepares To Become Top Holder Of U.S. Debt,

Even as the public debates aggressively on the nature of bond bubbles and whether they have a footing in the US economy, Tim Geithner's office has no intention to discover the denouement of this particular polemic, and instead is preparing to belch the lastest batch of US-backed paper. In the upcoming week the US Treasury will issue a total of $102 billion in 2, 5 and "curve sweetspot" 7 year notes, with nominal amount all in line with expectations.

And in the unlikely event that China decides to reorient its purchases to even more non-US debt and sell existing holdings as it did in June (previously discussed on Zero Hedge), there is always that UK-based nest of direct bidders who just can't get enough of their own, pardon, American issuance. With holdings of over $360 billion and rising, the otherwise insolvent UK needs just $440 billion to become the second largest holder. And since it has purchased $280 billion in the last year alone, the probability that the Fed, pardon, the UK will soon be the second, and possibly biggest holder of US debt is distinctly possible.

And incidentally speaking of the real, not shadow, Fed, its holdings of $777 billion in US Treasurys, and growing once again at a rate of $30 billion per month, will surpass Japan as the second largest holder of USTs by the end of September, and China, which holds just $40 billion more, by the mid-term elections. In other words, we should not worry that China will soon forsake us - after all the Fed is gladly once again monetizing the Chinese stake.

The 56 Year Benner Cycle

The 56 year cycle mentioned yesterday (“Periods When to Make Money” (© 1883) was picked up by FT Alphaville; we hear it caused some “consternation” in certain circles where the marinating of ice cubes takes place.

I find these approaches quite fascinating, if for no other reason than I consider myself a student of market history. (Whether it is an actionable thesis is an entirely different question). For those of you who are also interested in such things, let’s explore this periodicity, better known as the Benner Cycle.

Samuel Benner was a prosperous farmer who was wiped out financially by the 1873 panic. When he try to discern the causes of fluctuations in markets, he came across a large degree of cyclicality.

Benner eventually published his findings in a book in 1875 — BENNERS PROPHECIES: FUTURE UPS AND DOWNS IN PRICEs – making business and commodity price forecasts for 1876 -1904. Many (but not all) of these forecasts were fairly accurate. (more)

Casey’s Technology Guru, Part 1: Profiting Post Tech Bubble

(Alex Daley, interviewed by Louis James, Editor, International Speculator)

Bio: Alex Daley is the senior editor of Casey's Extraordinary Technology. In his varied career, he's worked as a senior research executive, a software developer, project manager, senior IT executive, and technology marketer. As a technologist, he's collaborated on the development of numerous cutting-edge projects, from computer vision systems to autonomous robotic vehicles, to artificial intelligence algorithms, and more.

L: Doug Casey is somewhere in the depths of Cambodia this week, out of touch, and we've been talking technology, so it seemed fitting to talk to our own technology guru to see what he thinks of the field. So, Alex Daley, what do you think are the most important – and profitable – trends in the new technologies shaping up in our world?

Alex: First, technology continues advancing, regardless of what's happening with the economy, the housing market, interest rates, or what-have-you. Technology continues to be an area of innovation, for the U.S. and globally. When we look at it as investors, we see that there's a chance for investors to find great companies out there that offer the potential for extraordinary returns.

L: Hence the name of your monthly letter, Casey's Extraordinary Technology. (more)

Investors Fleeing Stocks With Cash Flow Lure JPMorgan

Investors are moving more money than ever before out of stocks and into bonds, widening a valuation gap and convincing JPMorgan Chase & Co. and BlackRock Inc. that now is the time to buy equities.

About $33 billion flowed out of funds owning U.S. shares this year even as the economic recovery sent free cash flow for American companies excluding banks to 6.8 percent of their market value. That’s the highest level compared with corporate debt yields since 1960, Credit Suisse Group AG data show. About $185 billion was sent to bond funds through July 31, the most on record, according to the Investment Company Institute.

The biggest money managers say concern the U.S. will slip into a recession is overblown and that individuals piling into fixed-income securities for their relative safety are making a mistake. David Kelly, who helps oversee $445 billion as chief market strategist for JPMorgan Funds, says record low yields show there’s too much demand for bonds and aren’t a sign the economy is headed for the second recession in three years. (more)

Canadian Business - 13 September 2010

Canadian Business – Insight and fresh ideas have never been more essential to success, and the new Canadian Business is a magazine all about those ideas. With more topical stories, more original reporting and more compelling voices, every issue of Canadian Business provides business leaders with the analysis and perspective on the issues, trends and personalities that are shaping the future of our economy.

read more here

Hindenburg Omen Confirmation #1

Today we got our first Hindenburg Omen confirmation. The number of new highs was 136, and new lows was at 69 (per the traditional WSJ source). Granted this particular criteria set was a little weak as the 69 is precisely on the borderline for confirmation (the 2.2%), and the new highs number was not more than double the new lows (although it was close). Less gating were the McClellan oscillator which was negative at -83.6, and the 10 week MVA, which rose, which were the two remaining conditions. The first omen was spotted on August 12 - a week later the H.O has been confirmed. The more confirmations, the scarier it gets from a technical perspective, not to mention the conversion into a self-fulfilling prophecy (like every other technical indicator).

U.S. stock indexes end sharply lower on gloomy jobs report

(MarketWatch) -- U.S. stocks crumpled Thursday as disheartening data on the jobs market and regional manufacturing furthered doubts about the recovery, circumventing enthusiasm that came with Intel Corp.'s $7.7 billion deal to acquire McAfee Inc.

The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 10,271, -144.33, -1.39%) closed down 144.33 points, or 1.4%, to end at 10,271.21, with all 30 components in the red for the day. The blue-chip average's loss broke two straight days of gains.

The hit to Wall Street came after a government report showed weekly jobless claims rising to a nine-month high. Read about unexpected rise in filings.

In addition, manufacturing in the Philadelphia region contracted and the Conference Board said its index of leading economic indicators climbed just 0.1% in July, with the lackluster rise pointing to slowing growth. See details of industrial core of the economy moving to a slower pace.

"As we worked our way over the past couple of months, the one thing we could hang our hat on was that at least manufacturing is working and hopefully the non-manufacturing sector will kick in," Art Hogan, chief market strategist at Jefferies & Company, said of the disappointing reports. (more)

Top 6 most indebted countries (and why)

by Michael Sanibel,

The recent financial crisis and recession have been a worldwide occurrence. The events in the United States since 2008 have garnered most of the headlines because the U. S. has the world's largest economy and national debt, but the reality is that many countries in Europe are in worse financial shape and continue to deteriorate.

There are various ways to rank indebtedness, such as debt per capita and deficit or debt as a function of gross domestic product (GDP). This ranking is based on cumulative debt as a percentage of GDP and is limited to an analysis of the 25 largest economies. It is further limited to "external" debt, which is the portion of the national debt that is owed only to foreign creditors. The source for the debt and GDP amounts is the Central Intelligence Agency World Factbook most recent numbers from mid to late 2009.

1. Ireland - Debt/GDP: 997%
The days of Ireland enjoying one of the fastest growing economies in Europe are over, at least for now. The story is all too familiar, as easy credit fueled a housing bubble that burst and damaged consumer confidence.

After recording budget surpluses in the prior two years, the economy reversed course in 2009 and contracted 7%. This eroded tax revenues and sent the annual deficit to a record 14.3% of GDP. The European Union set a target for Ireland to reduce that figure to 3% by 2014, but the International Monetary Fund has indicated that the deadline will be missed. Moody's has subsequently lowered its bond rating. (more)

Money Today - August 2010

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Hinde Capital On Why Silver Velocity Will Be The Bullet That Sends The Metal Much Higher

By Ben Davis, CEO of Hinde Capital, published for King World News. The latest interview of Ben Davis by Eric King can be found here.

Silver Velocity - The Coming Bullet

"Money can lose its value through excessive abundance, if so much silver is coined as to heighten people’s demand for silver bullion. For in this way the coinage’s estimation vanishes when it cannot buy as much silver as the money itself contains…The solution is to mint no more coinage until it recovers its par value”


Our Hinde Silver Trend model has reached a significant low that usually precedes a dynamic move. This move can be lower or higher but our other technical indicators signal a move higher is the most likely scenario. (more)