What We're Reading

From a chart point of view, there's a definite divergence in performance in U.S. solar stocks vs. their Chinese competitors.   Forget the cold war; is a trade war heating up with China?  Charts don't lie - people do.  Full disclosure StockBuz recommended long FSLR in 2013.

The United States slapped new import duties on solar panels and other related products from China on Tuesday after the Commerce department ruled they were produced using Chinese government subsidies, potentially inflaming trade tensions between the two countries.

The U.S. arm of German solar manufacturer SolarWorld AG filed a petition complaining that Chinese manufacturers are sidestepping duties imposed in 2012 by shifting production of the cells used to make their panels to Taiwan and continuing to flood the U.S. market with cheap products.

The new complaint seeks to close that loophole by extending import duties to also cover panels made with parts from Taiwan.

In a preliminary determination, the Commerce de

Moves today in AIG and MET to name a few may be based on speculation whether the Fed will move to regulate some insurers as "systemically important" which was previously discussed in this article on asset managers.  Under Dodd-Frank, the Financial Stability Oversight Council, a newly created super-regulator, can designate “systemically important financial institutions,” or SIFIs, and subject them to rules previously reserved for banks.  Steve Miller, AIG non-executive Chairman shares his view on CNBC.  Full disclosure StockBuz has previously recommended AIG long.

The chart says it all.  I will be adding to my shipping drawer stock $NAT here.  Maybe the shipping index truly has been an indicator of true global (low) demand coupled with an oversupply of ships and heavy debt but charts do not lie.  People do.  Funds should be adding to their positions down at this test of prior breakout support.  We may build a long base, which is healthy.  Add at the lows.  I will still hold my (alert) stop comfortably below the 2012 low (not by a few pennies either).  They may even try to shake out weak hands by taking out that low before reversing however I'm undaunted.  Come on, bring it.  I'll buy more at these prices as global economies begin to heal and M&A should pick up in this beaten up sector.

While the continual question remains, why are bonds holding up?  Why isn't that money flowing into equities?  We highly recommend recommend this piece from Variant Perceptions.  These gusy have nailed it over and over again in the past and maybe, just maybe big investors are embracing something that the little guy doesn't wish to accept.  That profit margins in our "new recovery" are unsustainable.  We may crawl higher, but they wouldn't bet the bank it will last long.  That's great!  I'd prefer reverting to the mean and loading up on names..........at lower levels.  Enjoy-

Profit margins in the US have hit modern-day record levels, and this has been used to help justify high equity valuations. Consensus estimates are for profit margins to remain steady, or even increase from current levels. We disagree for ironclad economic and accounting realities, and think margins will fall, taking equities down too.

Profit margins have, at least until now, exhibited mean-reversion like behaviour. Th

Not all Americans are enjoying the slow economic rebound. A poll found that about half of unemployed workers say they have given up looking for a job.

A Harris poll on behalf of Express Employment Professionals conducted last month found that 47% of such workers say they have "completely given up looking for work." The survey of 1,500 unemployed adult Americans also found that 82% of those who receive unemployment compensation say they would look harder for a job if those payments ran out. The other 18% agreed with the statement that they would be in such despair, they would give up looking for work altogether.

Among other findings, the survey also revealed that 60% of respondents feel that looking for work has been harder than expected, and 10% say it's been easier than they thought. Overall, 91% agree with the following statement: “I’m hopeful that I will find a job I really want in the next six months.”

The U.S. Bureau of Labor Statistics reported [PDF] that the national unemploymen

Sadly wage growth......is not growing so does anyone see a resolution to this "underwater" problem other than time?   From Forbes:

A total of 9.7 million American households still have “underwater” mortgages, meaning they owe more on the home than it is currently worth. Homes in the lowest price tier are most affected, according to data released today from Zillow.

Thirty percent of homes in the bottom price tier are in negative equity, while only 18.1% of homes in the middle tier and 10.7% in top tier are underwater, according to Zillow’s Negative Equity Report. Homes are defined as top, middle, or bottom tier based on their estimated value compared to the median home price for that area. (Nationally, the median price in the top tier is $306,700; middle tier, $163,400; bottom, $98,400.)

Overall, 18.8% of homeowners were underwater during the first quarter of 2014. 

Zillow’s figures for homes with negative equity are higher than other recent reports looking at the same problem.

Meanwhile MGM and other casino names are showing signs of head-and-shoulders tops.  Full disclosure I am long LVS as a long standing drawer pick and short MGM here. (click chart to enlarge)

Macau is the growth engine for the global casino industry, and revenue growth for casinos there seems to be slowing, Wells Fargo said in a report.

That could affect sales and earnings for world's largest casino company, Las Vegas Sands (LVS), and rivals Wynn Resorts (WYNN) and MGM Resorts International (MGM), which all have properties in Macau. It could also hurt Hong Kong-based Melco Crown Entertainment (MPEL), which competes with the Vegas casinos in Macau.

Wells Fargo analyst Cameron McKnight is in Macau meeting with company executives this week. McKnight said in a Monday report that, based on those meetings and channel checks, he expects May revenue for Macau casinos will rise 10% to 14% compared with the same month a year ago. That's well below his earlier forecast for 14% to 16% growth.

Coincidence? I doubt it.

A huge slowdown in Germany is on the way, yet few see it. Steen Jakobsen, chief economist at Saxo bank writes via email ...

Back from major trip to Brazil, Uruguay, US and Spain.

The one thing which to me is being ignored by the market is the coming slow-down in Germany. The market can of course go up in times of weaker growth, but my big “thing” is that no one believes Germany economically is slowing despite very negative macro changes in the last twelve months:

• The China rebalancing will cost Germany export volume.
• Germany has the most expensive energy policy in Europe – a drive away from atomic power dependency to a less obvious dependency on Russian gas.
• The Ukraine crisis impacts Germany. According to the Federation of German Wholesale, Foreign Trade and Services (BGA) about 6.200 German companies are doing business in Russia.
• The coming Chinese devaluation of the Yuan will significantly lift Chinese import prices.

I had to write a monthly OP-ED for Swiss Financial newspaper

Some recovery.  *pfft* 

To construct this chart, we compute for each month the year-over-year house price change for all 1,220 counties for which CoreLogic reports overall house price indexes. Those price changes are ranked from highest to lowest and then reported as percentiles based on this ranking. For example, the 5th percentile tracks the 61st-lowest county-level house price change in each month. Note that an individual county can be, and often is, in different percentiles over time. Gray shading indicates an NBER recession.

Courtesy of NYFed

This visual gives one a clear perspective on what housing areas were hit the hardest during the recent financial crisis and subsequent housing (price) fall. The recovery in some areas has been amazing.

Created by Catherine Mulbrandon at VisualizingEconomics.com

Ouch that hurts.  Luckily the Fed doesn't include food in their inflation data.  (yes, sarcasm) Seriously though in a day and age where companies can "afford" enormous CEO salary hikes, share repurchases and buybacks, it behooves me they continue to stomp their feet stating they cannot afford a minimum wage hike. 

Almost half of the states in the U.S. are already paying more than the federal minimum wage and those states are surviving just fine.  San Jose and Washington have seen expansion in small business and increased revenue with $10 minimum wages.  The propaganda has become ridiculous folks.  Just my .02

Ashraf says it's all about European CPI and GDP. 

The new home market, held down by high prices and low supply of units, appears to be stalling further, not accelerating, as the spring unfolds. The housing market index fell 1 point to 45 which is 3 points below the low-end forecast. And weakness is centered in current sales, down 2 points to 48 in a reading that points to further trouble for new home sales.

But expectations for future sales are strong, up 1 point to 57, while traffic is weak but improving, up 2 points to 33. Breakdowns show mid-to-high 40 readings for all regions except the Northeast which is by far the smallest region for new home sales and is lagging badly.

The new home market in general has been lagging badly, lagging both the economy and holding down the housing sector. March new home sales fell a very surprising 14.5 percent in March and today's report doesn't point to much improvement for April and May.

The "new normal"?  With new job creation being either at the very low end, or very high end of the pay range

Enough said

I so would love FOX news to pause from all the foot stomping and finger pointing "the labor force participation rate continues to drop under Obama and his failed Presidency!" to respond to this post from Ritholtz but that will never happen............because it doesn't boost ratings.  If you drink the FOX koolaid, please take a look at this research and do some of your own. 

Is it Obama's "failed policies"....or a good percentage merely a matter of aging demographics AND was it foretold?  Yes it was - over a decade ago.  Of course riling people up brings in viewers and sells newspapers.  Hype sells, peiod.  Telling people they knew it was going to happen but didn't bother to warn you...........well, not so good.  Its easier to point at a President and say's "it's all his fault" than to admit that aging baby boomers coupled with increased automation and outsourcing to help companies bottom line (stock price) are the main culprits. 

By the way, while they're pouring kerosene on your sm

On the heels of the announcement AT&T was in the talks to acquire DTV, David Faber on CNBC mentioned he believed we will see a great deal more M&A going forward; that this is the perfect environment for it. Kos agrees. One way to be able to demand a higher price is to remove (absorb) the competition and shrink the space. Case in point; look at airlines.

Deregulation passed in 1978 created not only a surge in small, value brand names such as Southwest and AirTran. These low-cost names truly began to put pressure on larger airlines. Remember airfare wars? The winner was you and me so what's a larger airline to do to counteract these price ware? How can you demand a higher price? Absorb your competition.

This graphic shows how even back in 2010, just how many were merged with their larger counterparts. (click image to enlarge)

Sadly the loser will be the consumer as M&A means consolidation and layoffs. Wave goodbye to competitive consumer pricing.

The winner - stockholders.

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