Monday, December 10, 2012

Alasdair Macleod- Money Printing Insanity Part I

Chart of the Day - Canadian Pacific Railway (CP)

The "Chart of the Day" is Canadian Pacific Railway (CP), which showed up on Thursday's Barchart "All-Time High" list. Canadian Pacific posted an all-time Thursday at $100.85 and closed up +2.76%. TrendSpotter has been long since Oct 5 at $88.88. In recent news on the stock, Canadian Pacific announced on Wednesday that it will eliminate 4,500 positions, or about 23 percent of its workforce, by 2016. Canadian Pacific said the reductions will be achieved through job cuts, attrition and fewer contractors as part of its restructuring plan. Citi Investment Research analyst Christian Wetherbee rated Canadian Pacific a "buy" and said that investors should be upbeat that the company's plan is being driven by the job eliminations and other actions, such as the closing of some train yards. Canadian Pacific Railway, with a market cap of $16.2 billion, is North America's first transcontinental railway, Canada's second-biggest railway and is the only transcontinental carrier with direct service to the U.S. Eastern Seaboard.

Investing Advice from Hugh Hendry

This is a good interview with Hugh Hendry, who I always enjoy. It runs twenty minutes.
Hugh Hendry, of Eclectica Asset Management, takes the long view on investing at The Economist’s Buttonwood Gathering on October 25th 2012. He was interviewed by The Economist’s Philip Coggan.

Chart Of The Day: The Real Household Net Worth As A % Of Debt Chart / By Tyler Durden / 12/08/2012 19:24
In the hours following the release of the latest Flow of Funds statement on Thursday, some of the glorified powerpoint-cum-statist tabloid media outlets released a very disingenuous and flat out wrong comparison of household net worth to total US debt (even though technically total US GDP was showed, although the two are now interchangeable with total US Debt having surpassed total US GDP).  Supposedly this was intended to demonstrate the “net worth of America is massively positive” and that America is “not even close to being broke.” Of course, by doing so they merely confirmed once more their complete cluelessness when it comes to the debt market, as US household net worth (source) is the direct beneficiary not just of sovereign debt, but certainly all on-balance sheet debt verticals in existence which include, again from the Flow of Funds report tab L.1, household, non-financial corporate, non-financial non-corporate, financial and rest of world debt. The grand total is also conveniently tracked by the Fed in the Total Credit Market Debt Owed category (source) which in the last quarter was $55.3 trillion: just “modestly” above the $16.3 trillion strawman of merely US Federal debt. Comparing this to the $65 trillion in household net worth certainly gives a far less rosy picture of just how “massively positive” net worth of America is.

Westlake Chemical Corporation (NYSE: WLK)

Westlake Chemical Corporation manufactures and markets basic chemicals, vinyls, polymers, and fabricated building products. It operates in two segments, Olefins and Vinyls. The Olefins segment provides ethylene, polyethylene, styrene monomer, and various ethylene co-products, such as chemical grade propylene, crude butadiene, pyrolysis gasoline, and hydrogen. The Vinyls segment offers polyvinyl chloride (PVC), vinyl chloride monomer, ethylene dichloride, chlorine, caustic soda, and ethylene. This segment also manufactures and sells products fabricated from PVC, including water, sewer, irrigation, and conduit pipes; window and door profiles; and fences. The company's products are used in various applications, such as consumer and industrial markets comprising flexible and rigid packaging, automotive products, coatings, and residential and commercial construction, as well as in other durable and non-durable goods. Westlake Chemical Corporation provides its products for chemical processors, plastics fabricators, construction contractors, municipalities, and supply warehouses in the United States, Canada, Singapore, and internationally.

Westlake's stock is forming a head and shoulders (H&S) pattern. Please take a look at the 1-year chart of WLK (Westlake Chemical Corporation) below with my added notations:
1-year chart of WLK (Westlake Chemical Corporation)
WLK started a nice rally in June from $50 that peaked in October and November at $80. Over the last (3) months though, the stock has created a very important level at $70 (navy), which would also be the “neckline” support for WLK's H&S pattern. Above the neckline you will notice the H&S pattern itself (red). Confirmation of the H&S would occur if the stock broke below its $70 support. If WLK breaks that level, the stock should move lower from there.

AAPL Death-Cross Pushes Dow To Highs

Of course, it makes perfect sense – the largest market cap company in the world drops further and experiences a death cross and sure enough – the evergreen Dow Jones Industrial Average ended near the highs of the day – well north of the critical ‘retirement-on’ 13,000. In general risk-assets were quietly correlated with stocks today (amid relatively quiet volume on the major averages) but we note that the capital structure ETFs in general were less exuberant – though they did get a little bounce after the consumer credit data. All-in-all, the Dow stood alone in its non-AAPL exuberance as the rest of the market was mired in the sentment shift that is occurring (note the Dow saw ts 50DMA cross below its 100DMA and its closed perfectly intersecting with those averages). Must be the ‘great’ jobs number, right? Treasury yields end near their lows of the week, USD near its highs, Gold down on the week though at 3-day highs (supporting stocks), and high-yield credit weak today. Paging Skynet…
The S&P remained considerably more excited that credit/rates/vol today – though the latter did tend to keep pulling back up…

US Weekly Economic Calendar

time (et) report period Actual forecast previous
  None scheduled        
8:30 am Trade deficit Oct.   -$42.7 bln -$41.5 bln
10 am Wholesales trade Oct.
-- 1.1%
10 am Job openings Oct.   -- 3.6 mln
8:30 am Import price index Nov.   -0.5% 0.5%
12:30 pm FOMC statement --      
2 pm Federal budget Nov.   -- -$137 bln
2:15 pm Bernanke press conference --      
8:30 am  Weekly jobless claims  12-8
370,000 370,000 
8:30 am Retail sales Nov.   0.4% -0.3%
8:30 am Retail sales ex-autos Nov.   -0.2% 0.0%
8:30 am Producer price index Nov.   -0.5% -0.2%
8:30 am Core PPI Nov.   0.2% -0.2%
10 an Inventories Oct.   0.5% 0.7%
8:30 am Consumer price index Nov.
-0.2% 0.1%
8:30 am Core CPI Nov.   0.2% 0.2%
9:15 am Industrial production Nov.   0.1% -0.4%