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We thought we had it all figured out before this week started.We were wrong.
The top minds in the investment business offered some novel analysis, broke conventional wisdom, and even opened our eyes to some misperceptions.
This particular week we learned that BLS data is “made up,” Kohl’s could be a leading indicator for Target, the best way to profit off of the January effect, and one bank is bumping up its first quarter growth forecast.
What follows are excerpts from such stories this week. All of the important stuff you might have missed this week, right here.
'His conclusion: In a field that prides itself on its scientific rigour (however dismal), the books reveal that alarmingly few facts about the crisis have been agreed upon. Was there too little or too much regulation? How much of a factor were low interest rates? No one's been able to say conclusively.'
'And beyond just this, it seems more and more evident that the balance of growth is shifting. We don't have any details yet, but given that the trade surplus ended 2011 at only just over 2 pct of GDP, it seems clear that net trade negatively contributed more and more as the year progresses. Consumption, therefore, must have started to rise as a share of GDP.'
'African economies are growing, and millions have moved into the middle class category within the last decade. And Africans are buying things, from iPads to Porsches. Africans are also becoming global players, with some of their banks -- such as United Bank for Africa and Guaranty Trust Bank -- opening offices in the U.S., France and the U.K.'
'In particular, the report cites Glencore International Plc, which shipped grains to Europe using a ship operated by Global Maritime Investments Ltd according to Bloomberg. Global Maritime Investments not only offered the trip for free but actually paid $2,000 per day in fuel costs. That beats the cost of repositioning the ship without carrying a load. Global Maritime could have paid as much as $50,000 per day for fuel on the voyage.'
'From our perspective, portfolio tracking error for most money managers has been relatively low over the past several years and understandably so since high stock correlations (Chart 1) virtually eliminated the reward for having more aggressive portfolio positions. However, 2012 has been an entirely different story as correlations have fallen dramatically with current levels near their lowest levels in over the past 25 years. This is particularly interesting considering January's strong market performance, which implies that while some stocks had very strong gains, others had very weak gains--a sharp divergence from performance patterns exhibited toward the end of 2011.'
'The real surprise though is that it seems Kohl's sales trends lead Target's. We were always of the belief that Target drove traffic to Kohl's, and in turn, Kohl's SSS were somewhat dependent on the health of larger retailers such as Target. Instead, in the '07 downturn, the inflection point in Kohl's SSS occurred before Target's, and the same was witnessed in the recovery.'
'Since the S&P downgrade on August 5 of last year... The stock market (red line) is way up, and US borrowing costs (blue line) are way down.'
'Bond yields have sharply decoupled from risk assets, and from accelerating US loan growth. Garthwaite expects yields to eventually rise. US corporate credit spreads still appear to be pricing in a recession, whereas European spreads aren't.'
'For now, investors remain focused solely on the market's (relative) attractive valuation, improved liquidity conditions, the removal of tail risk banking outcomes and improving economic conditions in the United States. This week, the improved liquidity conditions will highlighted by central bank meetings (the BOE and ECB both meet). In light of these developments, those with whom we're speaking feel justified in taking the market higher. For now, we won't argue.'
'The perennially negative Nouriel Roubini -- nicknamed Dr. Doom for his usually critical views -- is turning bullish. You read that right, Roubini is betting on additional stock market gains. 'We're a believer; we're celebrating. We think the rally has legs,' explains Gina Sanchez, Roubini's director of equity and allocation strategy.'
'This is meant to be a long-winded encouragement to you to apply your patented numbers forensic skills to the monthly BLS reports or any of the other market movers. In the last 7 years, for example, the Christmas shopping season has been all over the lot and presumably, retail hiring, too. But the unadjusted retail jobs reduction in January vs. December has not varied by much more than 150,000 from a base count of 15 million. That's a 1% variation, notwithstanding the huge shopping season differences they report on bubble vision.'
Chinese Electricity Consumption Fell Massively In January, And The Chinese New Year Doesn't Explain It
'According to the China Securities Journal, China's electricity consumption in January fell by 7.5%. We estimate this may be the first decline since 2002 (excluding the financial crisis period in 2008-09), indicating industrial production may have slowed sharply in January.'
SAM STOVALL: Here's The Best Way To Profit From The January Effect, Presidential Cycle And S&P 5-Day Rule
'Since 1970, a portfolio consisting of an equal weighting to the 10 S&P 500 sub-industries with the best January performances went on to post a 12- month CAGR of 14.4% versus 6.8% for the S&P 500 (excluding dividends). What's more, this January Barometer Portfolio of sub-industries beat the market nearly 70% of the time. Of course, there's no guarantee that what worked in the past will work again in the future.'
'Interesting comment here from BTIG's Dan Greenhaus: ...the S&P continues to push higher although it shouldn't go unnoticed that the Russell 2000 is down in three of the last four sessions, the transports are down in six of the last nine sessions and a large amount of recent gains in broad markets can be explained simply and solely by strength in AAPL.'
'This morning, news broke that the Greeks had a reform deal. The Euro shot up on the news.
But if you were on twitter, you could have profited early.
Trader @pawelmorski just posted this annotated chart.'
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