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Monday links: permabear massacre
?Tis the season. Check out Brenda Jubin?s favorite books for 2013 at Reading the Markets including Building Reliable Trading Systems: Tradable Strategies That Perform as they Backtest and Meet Your Risk-Reward Goals by Keith Fitschen.
Quote of the day
Joshua Brown, ?I sure hope the US stock market pauses or corrects soon ? because otherwise it?s going to be a complete and total permabear massacre.? (The Reformed Broker)
Chart of the day
Productivity (and stocks) Jump; Honda (HMC) Recalls Acura
Stocks were headed higher on Monday morning after non-farm productivity increased at its highest rate in almost four years for the third-quarter in the US. The Labor Department announced that productivity was up 3% during the quarter, following a 1.8% rise in the second-quarter. A level this high has not been seen since the fourth-quarter of 2009. This large increase was partially attributed to a 4.7% gain in output. The data released surpassed analysts expectations of a 2.8% gain for the index. Productivity takes into account the hourly output per worker. In the same report the Labor Department said that unit labor costs were down at 1.4% rate during the same quarter. This measures the labor-related cost for a given unit of output. This is more than double the drop analysts were expecting. During the fourth-quarter last year, there was a 2% gain for the index. Despite the seemingly positive information, the broader data is showing slower productivity growth. There was only a mere 0.3% increase in productivity over last year at this time. This is largely attributed to a slowing investment in equipment and machinery by business?s in recent years. Oxford Economics had this to say in a note to clients, ?Businesses are finding it increasingly difficult to squeeze more output out of their existing workforce.?
Honda Motor Co (HMC) announced that they would be recalling nearly 7,750 Acura?s due to a possible loose bolt problem. The company said that their Acura RLX sedan?s that were sold in the United States and Canada will need to be recalled so they can replace rear suspension bolts that may have been improperly tightened. HMC said that any of the eight bolts that secure the rear suspension of their 2014 models could loosen over time and fall out which could cause a disruption to the vehicles alignment and increase the risk of a crash. They said to date they have not been made aware of any crashes due to the problem. The notifications for recalls will begin being sent out in January.
The new target of the budget cuts has been announced and it will be pensions of federal employees. The federal workers pensions are quite generous when compared to those employees who work in the private sector but not for long. For federal employees that were hired after 2012, changes are being made. In order to cover their pensions, employees hired starting January of this coming year will begin paying 4.4% of their pay to help cover their pensions. Those hired in 2013 will pay 3.1% and any employees prior to that will pay 0.8%. Jackie Simon, policy director for the American Federation for Government Employees, who represents nearly 630,000 federal employees, said, ?It?s insane they should be expected to fund government. It?s a big country. The burden should be spread more broadly.?
That?s all for the day.
All the best,
Jack Aubrey, Oakshire Financial
Forget Nike: Get 30% Upside With This Apparel 'Startup' Instead
Technology is all around us and in everything: our homes, cars, offices -- and even in our clothing.
Apparel companies are looking more and more like technology companies these days. Wearable technology has become one of the fastest-growing markets over the past year, with apparel companies pushing the limits on recording our physical activity and then transforming it into useful data.
One of the fastest-growing and most innovative companies in the apparel space, Under Armour (NYSE: UA) is at the forefront of this trend. Under Armour has the insight of real-life athletes, the look of an apparel company and the feel of a tech company.
Under Armour's products are sold to a number of teams and athletes, from colleges to the pros. The company's founder, Kevin Plank, came up with the idea of performance apparel during the mid-1990s as the special teams captain of the University of Maryland football team.
When you look under the hood, Under Armour operates a little like a tech startup, hosting contests to improve its products and hiring more developers to build and improve their technology. And even though Under Armour has a well-recognized brand by now, it's still a growth story.
Its market cap is $8.9 billion, a small fraction of Nike's (NYSE: NKE) $69 billion. But in addition to the growing market for wearable apparel, Under Armour still has a huge growth opportunity overseas, seeing as almost 95% of its revenue comes from North America.
Sundown at the Permabear Alamo
I sure hope the US stock market pauses or corrects soon ? because otherwise it?s going to be a complete and total permabear massacre.
China is stabilizing. Europe is growing ? peripheral Europe is growing! Japan is percolating. US manufacturing is back above pre-recession levels and household net worth is too. American politicians are introducing bipartisan budget deals. Iran is talking peace. The gold investment complex is collapsing.
None of this was supposed to happen! It was all meant to unravel. WTF?
The pessimists have been absolutely routed this year, it?s becoming uncomfortable to watch. Their intellectual leaders are abandoning the cause or, worse, switching sides. None of their formulas or equations are working, they?re just losing more people more money every month. Those who answer to clients have run out of excuses, they?re now lashing out at everyone else to make themselves feel better.
Because they can?t have been wrong, just early ? and it?s not their fault anyhow. It?s the Fed?s fault, or the fault of other financial commentators or the fault of foreign central banks.
But they?re sticking to their ?process? ? and don?t you ever dare question their process, no matter how poorly it works and for how long.
I am not incorrect for four years running - the entire world is incorrect. You?ll see.
Surely this can?t continue for much longer, can it? I hope not.
May the fates order a ceasefire on the Permabear Alamo, and soon.
Dave Landry's Market in a Minute - Monday, 12/16/13
Random Thoughts
Housekeeping: Thanks again to all who attended the webinar on Saturday. Based on the feedback, it looks like we had a great show. The recordings have been processed and uploaded. These will be going out later today. If you would like to get them earlier, send me an email and I'll reply with the link.
The market continued to stabilize from its recent slide.
The Ps ended in flatsville. Net net, they haven't made much progress since late October. So far, they have found support right at their prior breakout, circa 1775. It also looks like the 50-day moving average will soon be there too. Often multiple technicals can come together at the same point. It's like the Cajun joke about the Thermos. It keeps the hot things hot and the cold things cold. "How do it know?"
The Quack started strong but ended weak. It still managed to close in the plus column nonetheless. This action has it a minor support, circa 4,000. The next would be the top of its prior range, circa 3,950. The 50-day moving average is also nearing this support.
Speaking of da fidy, the Rusty is sitting right on its 50-day moving average. It was the big winner on the day, tacking on 1/3 %--better than a poke in the eye I suppose.
When markets correct, you're faced with a dilemma. Is it the start of something bigger? Is the sky falling? They do slide faster than they glide, right?
So, you have to anticipate. Correct?
True, you do have to be on your toes because what starts as what appears to be only a correction could always turn into something much bigger. Ideally though, you want to wait for some additional clues.
There's nothing magical about the aforementioned 50-day moving average but it can help to keep you on the right side of the market. As mentioned in the Stock Selection webinar over the weekend, years ago while developing systems for a client, if they didn't work, we'd "throw a moving average in"--take long trades only when above and short trades only when below. This, in and of itself, often made a non-working system work. Err on the side of the moving average/longer-term trend.
Speaking of moving averages, the Bowtie Moving averages (email me if you need the pattern) have turned down. They could signal soon. Bowties off of all-time highs can signify a major top. The good news is, a few big up days would negate this. And, futures are up fairly big pre-market.
This International Stock Offers An 11% Yield And 45% Upside
I've always loved telco stocks.
As investors, we're told to train ourselves to look at stocks rationally and to remove emotion from the process. Warren Buffett warns that your stock you won't tell you it loves you when you come at night.
But dividend investing is also about finding great yield -- and, with a tip of the hat to Willie Sutton, telco stocks are where the money is.
Investors have almost always done well with domestic heavyweights AT&T (NYSE: T) and Verizon (NYSE: VZ). But I've always found more yield and value in international telco stocks. Vodafone Group (NYSE: VOD) has always been a good holding thanks to the British company's investment in Verizon (a 41% stake before its recent sale) and its focus on emerging and frontier markets.
Telefonica Brasil has the yield and value characteristics I look for in an international telco stock. The Sao Paulo-based telecom provides fixed-line and mobile communications, broadband Internet and pay TV services, among other offerings. A subsidiary of global telecom conglomerate Telefonica (NYSE: TEF), Telefonica Brasil serves nearly 28% of Brazil's wireless market under the Vivo brand.
Yet VIV is off by more than 30% from its 52-week high. What gives?
December 16, 2013 ? Quote of the Day
?The rule of thumb is to do your homework, do your analysis, don?t give up prudent risk management for the sake of certain fads. Look for real valuations, and stay true to your time frames,? saidMarc Chandler, the global head of currency strategy at Brown Brothers Harriman.
go to the Mad Hedge Fund Trader's website
