Monday, November 4, 2013

The Beginning of The Rise in Interest Rates is Here

The one thing to emerge from the debt ceiling crisis has been to highlight the short-term debt focus. Every Thursday the US government has had to sell $100 billion of new debt rolling over short-term with 3 month bills. This may have helped to bring down long-term rates and it reduced the interest expenditures, but it has introduced extreme vulnerability to a sudden loss of lenders’ trust as lawmakers debate whether to raise a cap on public borrowing.
U.S. Treasury will unveil its new borrowing strategy that will signal the shift in interest rates has arrived. The extreme short-term debt can trigger default within days or weeks around one of these debt ceiling debates placing more power in the hands of the Tea Party. The Obama Administration is counter-acting with starting to shift the debt long-term to reduce Treasury need to raise $100 billion to repay short-term debts on a weekly basis.
The Treasury will now shift the U.S. government’s reliance on short-term debt, which increased dramatically ever since Clinton began to shift it to reduce interest expenditures to balance the budget. (see Op-Ed WSJ below), Under the new program, the Treasury plans to start selling 2-year floating-rate notes at regular auctions beginning in January. The yield on the new notes will float according to market conditions. Hence, we will begin to see longer-term rates start to rise.
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Don’t Miss This Golden Cross in Resources

While investors have been focusing on the strengthening U.S. market, we’ve also kept our eyes on other improving indicators happening in resources, Europe, and emerging markets. These places may not be as widely popular, but we believe investors can benefit greatly from taking a view that’s different from the ones observed by the majority.

No one would disagree that Warren Buffett, a famous contrarian, has been very successful by going against the herd.

A key is in identifying strengths early and using math in your favor. We’ve discussed many of these patterns before:

 Don’t Sell in May: Here are Reasons to Extend Your Stay
 Is Europe Ready to Take Off?
 Two Charts Illustrate How to “Follow the Money”
 5 China Charts That Look Bullish for Commodities
 Trying to Stop a Bull Market Has Risks

Consider the leadership change in stocks that took place earlier this year. During the last week in April, you’ll recall that U.S. equities bounced back after suffering the worst losses of the year in the previous week, with certain companies taking the lead. Here were our observations from the week’s performance:  (more)

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Lindsey Williams ~ Look For These Signs Before The Total Collapse of America

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BNN: Top Picks - ABT, KRFT, CON

Stuart Hinshelwood, US Equities Specialist, BMO Nesbitt Burns gives his Top Picks; Abbott Labs(ABT NYSE), Kraft Foods (KRFT NASDAQ), Conoco Phillips (CON NYSE)
 click here to view
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Cliffs Natural Resources (NYSE: CLF), This Beaten-Down Coal Stock Could be a Double-Digit Gainer

There are a few sectors that have been breaking investors' hearts for some time. Natural gas and gold instantly come to mind. Coal miners also fell into this category, but when nobody was looking, the sector put in a nice four-month rally.
Cliffs Natural Resources (NYSE: CLF) is an international iron ore and coal miner. While it has done well since the middle of this year, its long-term chart is indeed painful to look at. Peaking above $100 in early 2011, it began a long descent to a low of $15.41 in July. Along the way, there were plenty of false upside breakouts that created false hope and real losses.
CLF Stock Chart
But right now, the chart shows a possible inverted head-and-shoulders formation. Marked by two lows (the shoulders) on either side of a lower low (the head), it suggests that the trend is in the process of turning from down to up. Resistance, called the neckline, is found at the line connecting the highs of the two shoulders.  (more)

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US Weekly Economic Calendar

time (et) report period Actual CONSENSUS
10 am Factory orders Sept.   1.7% -2.4% (July)
10 am ISM nonmanufacturing Oct.   54.0% 54.4%
10 am Leading economic indicators Sept.   -- 0.7%
8:30 am Weekly jobless claims 11/2
335,000 340,000 
8:30 am Gross domestic product 3Q   2.1% 2.5%
3 pm Consumer credit Sept.   -- $13.6 bln
8:30 am Nonfarm payrolls Oct.   135,000 148,000
8:30 am Unemployment rate Oct.
7.4% 7.2%
8:30 am Personal income Sept.   0.3% 0.4%
8:30 am Consumer spending Sept.   0.2% 0.3%
8;30 am Core PCE price index Sept.   0.1% 0.2%
9:55 am UMich consumer sentiment Nov.   75.0 73.2
10 am Job openings Sept.   -- 3.9 mln
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