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After a week overwhelmed by economic announcements across the world — think PMI, consumer spending, GDP, unemployment — it’s time to sit back and take it all in. This week analysts tried to digest all of the above and look for signs of future market movement.
There’s on problem: everyone has a different opinion.
'The unemployment rate went up a tenth today, but at least we don't have to hear about how people are dropping out of the labour force. The labour force had fallen in March and April, those not in the labour force had risen. No jobs for them so they dropped out was the argument. But today, the labour force went up 642K, 422K of them found jobs, employment up, and 220K of them did not find jobs, so the unemployment level went up to 12.7 million. We cannot be too bearish then on the 8.2% unemployment rate, and this is especially true as unemployment claims are still low.'
'It is important that fundamental analysts understand how the senior management teams of the companies they are analysing are variably compensated, as those with restricted stock and not options are much more likely to increase dividends. The principle? People rarely intentionally damage their own net worth.'
'A Japanese-style scenario for the eurozone could gain traction, particularly if the 28-29 June EU summit fails to deliver concrete results. The capacity of European leaders to agree on the eurozone's future is key to restoring the Greek population's confidence and avoiding social unrest. In contrast, if the outcome is paralysis we can expect equity markets to plunge even deeper, to 2009 levels and even below if the Japanese-style scenario were to materialise.'
'Markets Preserving capital has become the universal rule as we just don't know what might now happen or drive the mood swings of Mr. Market‛, as our Global Strategist Dylan Grice coined it. Fundamentals no longer appear relevant and investors are turning to real physical assets like commodities and real estate in London and it seems anything that is not euro-related. London real estate and (in or view unjustifiably) the UK has largely continued to hold onto its 'safe haven' status. London's REITs today trade at a nil discount to net asset value and have almost been accorded 'gold status' with 2.0% dividend yield (uncovered for some) where you can get a 6.4% yield from real estate names on the continent (and a 17% discount).'
'We have reached the stage where officials in the Euro area ex-Greece (not just the Germans and the Dutch) openly threaten Greece with expulsion from the Euro if the existing troika package is not adhered to by the new government, while leaders of rising Greek political parties openly say that the Greeks need not follow their bailout programme since the rest of the Euro area cannot throw them out given the costs involved.'
'He writes that high cash balances of non-financial corporates, robust free cash flow measures and 'abundant unused debt capacity' signal that 'this vanishing of equities will accelerate despite higher dividend payout ratios,' driving a reduction in supply in the market for shares and thereby putting upward pressure on prices. And these buybacks could be further spurred if Congress passes corporate tax reform (reasoning included below) that allows companies to easily repatriate their overseas cash balances.'
'I think the investment bankers priced the offering based on how shares of Facebook were trading in the private market and their assessments of institutional demand. I don't think that revenue growth, margins, risk or any other fundamentals played much of a role in the pricing. I don't fault them for playing the momentum game, but they played it badly.'
'Furthermore, if we compare with the bond bubble experience of 2002-03, the pace of the US rate declines is lining up. This was when Japanese accounts had given up on the economy, whereas now it seems global investors are giving up on the euro‟s existence. It‟s true that risks are two-way in the short term, thus an overshoot under 1.5% on 10s could happen, but locking in at these rates (or lower) will likely result in losses in the not-so-distant future.'
'In a new report, Morgan Stanley analysts Sheela Rathi and Ridham Desai say that with the government's attempts to curb gold demand (because gold already represents 72 per cent of India's current account deficit), and weakness in the Indian rupee, India's gold demand could fall 4 per cent in volume in 2012, but rise 4 per cent in price.'
ALBERT EDWARDS: HAHAHAHA, The Bulls Aren't Laughing Anymore, The Stock Market Will Collapse And All Hope Will Be Lost
'As 30y German Bund yields slide below 2% and rapidly converge towards Japanese rates, we have a taster of what is to come in the US and UK in the months ahead. We still see US 10y yields -- even now making new all-time lows -- falling below 1% as hard landings occur in China and the US. The secular equity valuation bear market began in 2000 and renewed global recession will be the trigger to catalyze the third, and hopefully final, gut-wrenching phase of valuation de-rating. Expect the S&P 500 to decline decisively below its March 2009, 666 intra-day low. All hope will be crushed.'
'1. Above all (and as cited above), U.S. relative and absolute economic growth is superior to global growth. The U.S. economy, though sluggish in recovery relative to past expansions, is superior to most of the world's economies (with the exception of some emerging markets) in terms of diversity of end markets, quality of global franchises, management expertise, operating execution and financial foundations.'
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