interest rates - What We're Reading - StockBuz2024-03-28T22:51:32Zhttp://stockbuz.ning.com/articles/feed/tag/interest+ratesA Big Move Lies Aheadhttp://stockbuz.ning.com/articles/a-big-move-lies-ahead2017-06-03T14:45:33.000Z2017-06-03T14:45:33.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a href="https://northmantrader.files.wordpress.com/2016/04/move1.jpg" target="_blank"><img src="https://northmantrader.files.wordpress.com/2016/04/move1.jpg?w=300&h=188&width=300" style="padding: 10px;" class="align-left" width="300" /></a><em>Past tense; that is. </em> A big move is coming in the S&P 500 and it will take everyone’s breath away. Simply put: The S&P 500 has traded in a multi-year consolidation range with a high of 2134 and a low of 1810. A breakout or breakdown out of this range could result in a measured technical move of the height of the range, i.e. 2134 – 1810 = 324 handles. Consequently a break toward the upside would target 2458 (15% above all time highs) and conversely a breakdown would target 1486 and represent a 30.4% correction off of all time highs.</p>
<p>I’ve outlined the bear arguments in detail in <a href="https://northmantrader.com/2016/04/12/feeding-the-monster/"><em><strong>Feeding the Monster</strong></em></a>, so I won’t bother rehashing them here. However, in analyzing the larger market structures an interesting duality is emerging: A fight for control between the historic precedence of earnings and technicals and a very much divergent development in money supply, one of the key drivers behind stock prices since the financial crisis.</p>
<p>This duality can be summarized in one chart:</p>
<p><a href="https://northmantrader.files.wordpress.com/2016/04/spx-gaap-money-supply.png" target="_blank"><img src="https://northmantrader.files.wordpress.com/2016/04/spx-gaap-money-supply.png?w=610&h=458&width=610" class="align-right" width="610" /></a></p>
<p>Speaking for a breakdown so far is the historical similarity in structure of the monthly RSI and a decrease in GAAP earnings since 2015. Furthermore the $SPX has broken its ascending trend line in 2015 coinciding almost perfectly with the peak in GAAP earnings. These 3 developments are bearish in any historical context.</p>
<p>Note though something curious has happened during the same time: While price has recovered dramatically since February the continued decrease in earnings has made stocks the most expensive in years with a GAAP P/E ratio north of 24.</p>
<p><a href="https://northmantrader.files.wordpress.com/2016/04/trends.png" rel="attachment wp-att-19866"><img data-attachment-id="19866" data-permalink="https://northmantrader.com/2016/04/16/the-big-move/trends/" data-orig-file="https://northmantrader.files.wordpress.com/2016/04/trends.png" data-orig-size="2448,650" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="trends" data-image-description="" data-medium-file="https://northmantrader.files.wordpress.com/2016/04/trends.png?w=300" data-large-file="https://northmantrader.files.wordpress.com/2016/04/trends.png?w=610&h=162" class="alignnone size-large wp-image-19866" src="https://northmantrader.files.wordpress.com/2016/04/trends.png?w=610&h=162" alt="trends" height="234" width="882" /></a></p>
<p>Another key consideration: M1 money supply has continued to rise and print new record highs, not really deviating from the path it has embarked on ever since the financial crisis.</p>
<p>The reasons are generally well known as the Fed is a key source of influence:</p>
<p><a href="https://northmantrader.files.wordpress.com/2016/04/fed-balance-sheet.png" rel="attachment wp-att-19863"><img data-attachment-id="19863" data-permalink="https://northmantrader.com/2016/04/16/the-big-move/fed-balance-sheet-4/" data-orig-file="https://northmantrader.files.wordpress.com/2016/04/fed-balance-sheet.png" data-orig-size="1616,720" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="Fed balance sheet" data-image-description="" data-medium-file="https://northmantrader.files.wordpress.com/2016/04/fed-balance-sheet.png?w=300" data-large-file="https://northmantrader.files.wordpress.com/2016/04/fed-balance-sheet.png?w=610&h=272" class="alignnone size-large wp-image-19863" src="https://northmantrader.files.wordpress.com/2016/04/fed-balance-sheet.png?w=610&h=272" alt="Fed balance sheet" height="272" width="610" /></a></p>
<p>While the Fed has ended QE3 in October 2014 and is supposedly on some sort of rate hike path the evidence shows that its balance sheet has not only <strong>not</strong> decreased but it has stayed in a range and even made new highs in 2015. Just like the S&P 500. Imagine that:</p>
<p><a href="https://northmantrader.files.wordpress.com/2016/04/fred-bal-st.png" rel="attachment wp-att-19862"><img data-attachment-id="19862" data-permalink="https://northmantrader.com/2016/04/16/the-big-move/fred-bal-st/" data-orig-file="https://northmantrader.files.wordpress.com/2016/04/fred-bal-st.png" data-orig-size="1618,724" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="FRED bal ST" data-image-description="" data-medium-file="https://northmantrader.files.wordpress.com/2016/04/fred-bal-st.png?w=300" data-large-file="https://northmantrader.files.wordpress.com/2016/04/fred-bal-st.png?w=610&h=273" class="alignnone size-large wp-image-19862" src="https://northmantrader.files.wordpress.com/2016/04/fred-bal-st.png?w=610&h=273" alt="FRED bal ST" height="273" width="610" /></a></p>
<p>And this issue highlights the battle for control here and the argument for a break higher:</p>
<p><strong>A:</strong> A potential continued increase in M1 money supply which just made a new all time high in April:</p>
<p><a href="https://northmantrader.files.wordpress.com/2016/04/m12.png" rel="attachment wp-att-19859"><img data-attachment-id="19859" data-permalink="https://northmantrader.com/2016/04/16/the-big-move/m1-44/" data-orig-file="https://northmantrader.files.wordpress.com/2016/04/m12.png" data-orig-size="2468,1090" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="M1" data-image-description="" data-medium-file="https://northmantrader.files.wordpress.com/2016/04/m12.png?w=300" data-large-file="https://northmantrader.files.wordpress.com/2016/04/m12.png?w=610&h=269" class="alignnone size-large wp-image-19859" src="https://northmantrader.files.wordpress.com/2016/04/m12.png?w=610&h=269" alt="M1" height="269" width="610" /></a></p>
<p><strong>B:</strong> Should earnings revert higher (against current trend) then the combination of increased money supply & improved earnings would support the notion of an equity move toward the upper measured move target.</p>
<p>And perhaps markets are anticipating this move as evidenced by a sudden breakout in the cumulative advance/decline index:</p>
<p><a href="https://northmantrader.files.wordpress.com/2016/04/cum-nyad.png" rel="attachment wp-att-19865"><img data-attachment-id="19865" data-permalink="https://northmantrader.com/2016/04/16/the-big-move/cum-nyad-2/" data-orig-file="https://northmantrader.files.wordpress.com/2016/04/cum-nyad.png" data-orig-size="1968,876" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="Cum NYAD" data-image-description="" data-medium-file="https://northmantrader.files.wordpress.com/2016/04/cum-nyad.png?w=300" data-large-file="https://northmantrader.files.wordpress.com/2016/04/cum-nyad.png?w=610&h=272" class="alignnone size-large wp-image-19865" src="https://northmantrader.files.wordpress.com/2016/04/cum-nyad.png?w=610&h=272" alt="Cum NYAD" height="272" width="610" /></a></p>
<p>However, and possibly a warning sign that things are not as well as they suddenly seem: The $NYSE composite index just barely managed to get back to 2007 highs, a somewhat unimpressive result considering that it took over $4.5 trillion in Fed balance sheet expansion and a $10 trillion increase in US debt to get back to the same levels. And note it too, just like the $SPX, broke a key trend line in 2015:</p>
<p><a href="https://northmantrader.files.wordpress.com/2016/04/nyse-comp.png" rel="attachment wp-att-19855"><img data-attachment-id="19855" data-permalink="https://northmantrader.com/2016/04/16/the-big-move/nyse-comp/" data-orig-file="https://northmantrader.files.wordpress.com/2016/04/nyse-comp.png" data-orig-size="1950,898" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="NYSE comp" data-image-description="" data-medium-file="https://northmantrader.files.wordpress.com/2016/04/nyse-comp.png?w=300" data-large-file="https://northmantrader.files.wordpress.com/2016/04/nyse-comp.png?w=610&h=281" class="alignnone size-large wp-image-19855" src="https://northmantrader.files.wordpress.com/2016/04/nyse-comp.png?w=610&h=281" alt="NYSE comp" height="281" width="610" /></a></p>
<p><strong>The bottom line:</strong> This is a big battle for control. On the one hand fundamentals and technicals suggest a breakdown of size may well be in the cards, while on the other hand, continued <a href="http://video.cnbc.com/gallery/?video=3000493014"><em><strong>“highly accommodative”</strong></em></a> central bank policies coupled with perhaps an incremental relative improvement in earnings to come may result in a breakout making stocks even more expensive than they are now, the classic blow-off top scenario if you will. Clarity will only emerge once the range is decisively broken in either direction.</p>
<p>Whoever wins this battle gets the big move. 324 handles.</p>
</div>The Run In Small Caps. Will It Continue In 2017http://stockbuz.ning.com/articles/the-run-in-small-caps-will-it-continue-in-20172016-12-23T15:36:41.000Z2016-12-23T15:36:41.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><div class="copy last-child">
<p><span class="font-size-3"><a href="https://www.roycefunds.com/insights/editorial/images/Frank-Gannon_1a.jpg" target="_blank"><img src="https://www.roycefunds.com/insights/editorial/images/Frank-Gannon_1a.jpg?width=300" style="padding: 10px;" class="align-left" width="300" /></a></span></p>
<p><span class="font-size-2">The stock market went on quite a tear in the 3+ weeks immediately following the election, with the month of November especially beneficial for small-cap stocks.</span></p>
<p><span class="font-size-2">Before delving into what it all might mean for small-cap investors, here's a quick rundown to help contextualize just how dynamic a month it was:</span></p>
<div class="bullet-list" style="margin-left: 2em;">
<ol class="bullet-list last-child">
<li style="font-size: 15px;"><span class="font-size-2">This was the best November in the history of the Russell 2000 Index. featuring its highest monthly return since October 2011 when small-caps were just emerging from a precipitous decline.</span></li>
<li style="font-size: 15px;"><span class="font-size-2">The performance spread between small-cap and large-cap was the widest in 14 years (since April 2002). The Russell 2000 gained 11.2% for the month versus respective gains of 3.9% and 3.7% for the large-cap Russell 1000 and S&P 500 Indexes.</span></li>
<li style="font-size: 15px;"><span class="font-size-2">Small-cap value enjoyed a good year's worth of results in one month! During November, the Russell 2000 Value advanced 13.3% compared to 9.0% for the Russell 2000 Growth.</span></li>
<li style="font-size: 15px;" class="last-child"><span class="font-size-2">Small-cap value earned an even bigger advantage quarter-to-date, thanks to better performance during the mini-correction earlier in the quarter. From 9/30/16-11/30/16, small-cap value was up 9.6% versus a gain of 2.2% for small-cap growth.</span></li>
</ol>
</div>
<p><span class="font-size-2"><strong class="last-child">What drove small-cap value?<br class="last-child" /></strong> The strength of small-cap value has come from cyclical (and diverse) sectors including Financials, Industrials, Consumer Discretionary, Energy, and Materials.</span></p>
<p><span class="font-size-2">Financials benefited from a steepening yield curve that should help to boost bank profits, while optimism about accelerating economic growth helped Industrials and many Materials stocks. The U.S. consumer has ratcheted up spending, and rebounding commodity prices helped both Energy and, again, Materials.</span></p>
<p><span class="font-size-2"><strong>Small-Cap Cyclical Sectors Lead in November</strong></span><br class="last-child" />
<span class="font-size-2">Russell 2000 Sector Returns November 2016 and QTD</span></p>
<p><span class="font-size-2"><img alt="Small-Cap Cyclical Sectors Lead in November" src="https://www.roycefunds.com/insights/editorial/2016/12/Images/sectors-1116-4QTD.png" class="last-child" height="356" width="632" /></span></p>
<p><span class="font-size-2"><sup>1</sup><em class="last-child">Real Estate, formerly part of Financials, became a separate GICS sector on 8/31/16. </em></span></p>
<p><span class="font-size-2"><strong>What does this mean for small-cap investors?</strong></span><br class="last-child" />
<span class="font-size-2">To be sure, this is all welcome news, especially for small-cap active managers with a cyclical tilt.</span></p>
<p><span class="font-size-2">After such a remarkable run, it’s also understandable to ask, perhaps with a bit of trepidation, where small-caps go from here. We are contrarians, after all.</span></p>
<a href="https://www.roycefunds.com/insights/2016/11/what-does-a-post-trump-market-mean-for-investors"><span class="font-size-2"><img src="https://www.roycefunds.com/insights/2016/02/images/Charlie-Dreifus_141_2.jpg" /></span></a>
<h3><span class="font-size-2">What Does a Post-Trump Market Mean for Investors?</span></h3>
<p><span class="font-size-2">First, the current rally has exacerbated an already pronounced shift from growth to value while also solidifying a move from large-cap to small-cap.</span></p>
<p><span class="font-size-2">The post-election environment has also seen a dramatic rotation away from safety—bonds and defensive stocks most notably. Investors have shown increased confidence in the potential for accelerated economic growth and a likely policy shift from monetary to fiscal—chiefly in the form of tax cuts and projected spending increases on infrastructure and defense.</span></p>
<p><span class="font-size-2">How much of this is accurate and how much has already been priced in remain to be seen. Certainly, we see these as the critical questions to be answered going forward.</span></p>
<p><span class="font-size-2">It is not uncommon for major events (political or otherwise) to create outsized, short-term swings that manage to correct themselves as the future becomes clearer. We would not be at all surprised to see a correction over the next few months.</span></p>
<p><span class="font-size-2">After all, one result of the uptick is that many stocks now sport very high valuations based on these great expectations.</span></p>
<p><span class="font-size-2">As always, we think certain fundamentals will continue to matter as the interest rate environment (and with it the economy as a whole) returns to a more historically normal (and, in this instance, possibly inflationary) pattern.</span></p>
<p><span class="font-size-2">From our perspective as small-cap specialists, we see the key fundamentals going forward as earnings, profitability, the ability to self-fund, and valuations that we believe do not fully reflect these positive attributes.</span></p>
<p><span class="font-size-2">We view small-cap value's leadership as <a href="https://www.roycefunds.com/insights/editorial/2016/11/is-the-current-small-cap-cyle-different-than-large-cap.aspx">still comparably new</a> and that the cycle will remain favorable for both small-cap value and <a href="https://www.roycefunds.com/insights/2016/10/undiscovered-connection-between-value-led-periods-and-active-management.aspx" class="last-child">active approaches to the asset class</a>.</span></p>
<p><span class="font-size-2">Stay tuned…</span></p>
<p><span class="font-size-2">Courtesy of <a href="https://www.roycefunds.com/insights/editorial/2016/12/small-caps-enjoy-their-best-november" target="_blank">Royce Funds</a></span></p>
</div>
</div>Predicting The Feds Interest Rate Forecasthttp://stockbuz.ning.com/articles/predicting-the-feds-interest-rate-forecast2016-09-12T14:07:32.000Z2016-09-12T14:07:32.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_blank" href="http://static3.businessinsider.com/image/57c58e03b996eb96008b51ea-480/janet-yellen-congress-2016.jpg"><img class="align-left" src="http://static3.businessinsider.com/image/57c58e03b996eb96008b51ea-480/janet-yellen-congress-2016.jpg?width=480" height="245" width="327" /></a>This is one of the stranger things we've seen recently.</p>
<p>The research team at the San Francisco Fed <a href="http://www.frbsf.org/economic-research/files/el2016-26.pdf">earlier this week published a letter analyzing one startup's analysis</a> of Fed communications.</p>
<p>Economist Fernanda Nechio and researcher Rebecca Regan looked at data from <a href="http://prattle.co/">Prattle, a textual analysis specialist</a>, as part of an examination of the Fed's communication strategy following the financial crisis.</p>
<p>The short of it is that Prattle was accurately able to predict what the Fed's infamous "<a href="http://www.businessinsider.com/fed-dot-plot-june-2016-2016-6">dot plot</a>" would look like upon its next release.</p>
<p>Since 2012, the Fed has released a Summary of Economic Projections (SEP) — which contains economic projections from meeting participants — after every other Federal Open Market Committee meeting. The SEP also includes the dot plot, which is an aggregated forecast of where Fed officials see interest rates at various points in the future.</p>
<p>Prattle's findings show that Fed communications ahead of SEP releases can indicate where the Fed's median expectation for interest rates is likely to fall.</p>
<p>This is significant, as the median rate projection is an important number and serves as a guide to the Federal Reserve's view on the future path of interest rates.</p>
<p>The chart below shows the medium-term projections for the policy rate two to three years ahead released between September 2013 and June 2014.</p>
<p><span class="KonaFilter image-container display-table"><span><span data-post-image="" class="image on-image"><img src="http://static3.businessinsider.com/image/57d1d002b996eb74008b6c05-1010/screen%20shot%202016-09-08%20at%204.54.06%20pm.png" alt="Screen Shot 2016 09 08 at 4.54.06 PM" data-mce-source="FRBSF" /><span class="source-only"><span class="source"><span>FRBSF</span></span></span></span></span></span></p>
<p>Prattle uses a machine-learning algorithm to give each Fed communication a score, with a positive score providing a hawkish sentiment, and a negative score a dovish sentiment. </p>
<p>This chart shows Prattle scores for FOMC meeting participants’ speeches given in the weeks leading up to the FOMC meetings in September and December 2013 and March and June 2014. (Fed officials can't speak publicly for a week ahead of FOMC decisions.)</p>
<p><span class="KonaFilter image-container display-table"><span><span data-post-image="" class="image on-image"><img src="http://static3.businessinsider.com/image/57d1d02409d2931b008b6bef-1010/screen%20shot%202016-09-08%20at%204.54.37%20pm.png" alt="Screen Shot 2016 09 08 at 4.54.37 PM" data-mce-source="FRBSF" /><span class="source-only"><span class="source"><span>FRBSF</span></span></span></span></span></span></p>
<p>They look alike, right?</p>
<p>The San Francisco Fed also analyzed the median interest rate projection and the median sentiment score. The median score is especially important, as Fed officials have said this is the most accurate prediction of the path of the policy rate. Once again, Prattle's sentiment score was found to be pretty accurate.</p>
<p>"The figure shows a statistically reliable positive relationship between the median sentiment scores and the median medium-term SEP interest rate projections," the note said.</p>
<p>"This positive relationship suggests that, on average, speeches preceding the meeting that carry a more hawkish sentiment are associated with a higher projected level for the policy rate in the medium term."</p>
<p><span class="KonaFilter image-container display-table"><span><span data-post-image="" class="image on-image"><img src="http://static2.businessinsider.com/image/57d1cf1309d2937a048b6bb9-809/screen%20shot%202016-09-08%20at%204.50.05%20pm.png" alt="Screen Shot 2016 09 08 at 4.50.05 PM" data-mce-source="FRBSF" /></span></span></span></p>
<p>Courtesy of <a href="http://www.businessinsider.com/san-francisco-fed-on-prattle-2016-9" target="_blank">BusinessInsider</a></p>
</div>Monetary Policy And Rates. You Must Understand Money Flowhttp://stockbuz.ning.com/articles/monetary-policy-and-rates-you-must-understand-money-flow2015-09-13T20:35:14.000Z2015-09-13T20:35:14.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><span style="color: #ccffff;">Over the years, it's become essential (to me) to understand monetary policy and money flows across the globe. With all of the recent 'pining' over whether the Fed will begin to raise rates this year, I felt this piece from Financial Times gave a great representation of who is worried over what, and why. I truly recommend you give if it a read. There's also more discussed on <a href="http://www.ft.com/intl/cms/s/0/551c448e-5868-11e5-a28b-50226830d644.html#axzz3lcleNAsE" target="_blank">this article</a>. Enjoy.</span></p>
<h3 id="faq-why-now" class="card__title" itemprop="name">Why is the Fed considering raising interest rates now?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>America has seen its longest private sector hiring spurt on record, and unemployment has halved since its peak. The Fed thinks the hot jobs market could spur a pickup in inflation and wages. Given it is tasked with keeping inflation low, it is considering raising the cost of borrowing to keep the economy on an even keel.</p>
<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291222?profile=original"><img class="align-full" src="http://storage.ning.com/topology/rest/1.0/file/get/1291222?profile=RESIZE_1024x1024" width="700"></a></p>
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</div>
<h3 id="faq-why-so-long" class="card__title" itemprop="name">Why have rates in the US been held so low for so long?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>The US was hit by the crash in its housing market and banking sector between 2007-09. The Fed felt it needed to pull out all of the stops to prevent the economy from collapsing into a new Great Depression. One way of keeping things afloat was by cutting the cost of borrowing to rock-bottom levels.</p>
<a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291248?profile=original"><img class="align-full" src="http://storage.ning.com/topology/rest/1.0/file/get/1291248?profile=RESIZE_1024x1024" width="700"></a>
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<h3 id="faq-is-the-economy-ready" class="card__title" itemprop="name">Is the US economy ready to cope with interest rate rises?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>That is the trillion dollar question - and opinions vary widely. To optimists, the Fed has managed to engineer a respectable recovery that is outshining many other economies. They say a quarter-point increase would have a negligible impact but is a sensible first step to ensure the Fed stays ahead of inflation. Sceptics warn that inflation remains on the floor and the Fed risks roiling world markets and pushing up the dollar if it acts too soon.</p>
</div>
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<h3 id="faq-how-quickly" class="card__title" itemprop="name">How fast are rates likely to rise?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>Not fast at all - if the Fed is to be believed. One of the mantras adopted by Chair Janet Yellen this year has been that rate rises will be gradual. The pace of increases - when they begin - is expected to be less than half the tempo of the Fed’s last round of rate rises, which started in 2004. And the ultimate rate they stop at is likely to be very low too, at not much more than 3 per cent.</p>
<h4 class="chart-title">Federal reserve interest rate predictions from June 2015 meeting</h4>
<a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291265?profile=original"><img class="align-full" src="http://storage.ning.com/topology/rest/1.0/file/get/1291265?profile=original" width="340"></a>
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<hr class="card__splitter">
</div>
<h3 id="faq-how-high" class="card__title" itemprop="name">Will they return to the levels seen pre-crisis?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>Not for the foreseeable future, according to Fed policymakers’ own projections. The Fed believes the rate compatible with stable growth and prices has sunk sharply because of the lingering effects of the crisis and will increase only gradually. In this subdued post-crisis world, the central bank will need to keep its foot on the accelerator for some time to come.</p>
</div>
</div>
<h3 id="faq-how-economies-are-affected" class="card__title" itemprop="name">How does a rise in central bank interest rates get transmitted to the wider economy?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>Adjusting the federal funds rate - the rate banks charge each other for short-term loans - affects other short term rates paid by firms and households. These movements also have knock-on effects on long-term rates, including mortgages and corporate bonds. Changes in long-term rates will have an influence on asset prices, including the equity market. During the crisis the Fed also purchased longer-term mortgage backed securities and Treasury bonds to lower the level of long-term rates.</p>
</div>
</div>
<p></p>
<h3 class="section__subtitle"><span class="font-size-6">US Business</span></h3>
<p></p>
<h3 id="faq-are-businesses-ready" class="card__title" itemprop="name">Are businesses ready for an increase in borrowing costs?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>Many corporations have taken advantage of the low rate environment to borrow money via the bond markets. Most companies say they are relaxed about the impact of a small rate hike, believing the market has already priced their bonds or such an event. However, some economists say the interest payments for companies who have issued low-grade debt could rise more quickly.</p>
</div>
</div>
<h3 id="faq-what-are-zombie-companies" class="card__title" itemprop="name">What are zombie companies and why are we concerned about them?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>Zombie companies are enterprises that have been able to stay in business primarily because of the persistence of ultra-low interest rates, and which would be unable to survive a rate hike. Many of these companies will go under when their borrowing costs rise, but some, such as “bond king” Bill Gross, think this could be a good thing. They argue that when weak companies file for bankruptcy, their owners and employees often go on to work for more successful ventures, which is ultimately a good thing for the economy.</p>
</div>
</div>
<p></p>
<h3 class="section__subtitle"><span class="font-size-6">US Consumers</span></h3>
<p></p>
<h3 id="faq-personal-finances" class="card__title" itemprop="name">What will a rate rise mean for my personal finances?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>An upward move in short-term interest rates will be positive for savers who have been missing out on interest on their deposits. But the change could also be transmitted to a range of other interest rates, including car loans, credit cards and mortgages, which would make them more costly.</p>
</div>
</div>
<h3 id="faq-are-consumers-ready" class="card__title" itemprop="name">Are US consumers in general prepared for rates to rise?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>The burden of household debt has fallen since the crisis, reaching 114 per cent of net disposable income last year, according to OECD statistics, suggesting consumers are better prepared for higher borrowing costs. In addition, a quarter-point hike would still leave rates at historically low levels.</p>
</div>
</div>
<p></p>
<h3 class="section__subtitle"><span class="font-size-6">Financial Markets</span></h3>
<p></p>
<h3 id="faq-how-will-investors-react" class="card__title" itemprop="name">How will investors react to higher US interest rates?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>This is the hottest and most disputed question in markets today. Some say the Fed has telegraphed a move so clearly that markets will take any interest rate increase in their stride. Others fret that some turbulence is inevitable after seven years of “ZIRP” - zero interest rate policy - and trillions of dollars worth of bond-buying by the US central bank.</p>
</div>
</div>
<h3 id="faq-currency-markets" class="card__title" itemprop="name">How are currency traders positioning themselves in the anticipation of rate rises?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>Currency markets are fickle, but differences in interest rates tend to drive movements in the longer-run. For example, if a European investor can borrow cheaply in Berlin and buy a higher-yielding US bond, then all else being equal the dollar will rise versus the euro. As a result, the dollar started the year in rip-roaring fashion, with an index measuring the US currency against a basket of its peers rocketing to a 12-year high, as investors bet on the Fed tightening monetary policy and bond yield differences widened.</p>
<p>Since then it has continued to beat up emerging market currencies but the broad rally has fizzled out as the euro and the Japanese yen have regained their footing. However, many analysts and fund managers expect the greenback to continue to climb higher in the coming years, as the Fed raises interest rates further.</p>
</div>
</div>
<h3 id="faq-sensitive-investments" class="card__title" itemprop="name">What investments are most sensitive to interest rate rises?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>Almost every asset class on the planet exhibits some evidence of frothiness these days, but some seem more vulnerable to higher interest rates. Although stocks look expensive, higher interest rates indicates that economic growth is firm, and that is good for listed companies. Gold typically loses its shine when interest rates climb, as the metal doesn’t pay any interest like a bank account will, but has already been beaten up heavily recently. The bond market looks more exposed. Highly rated debt is trading with very low yields, which means they are vulnerable to even a modest rise in Fed interest rates, while bonds issued by companies rated “junk” could suffer if more expensive borrowing tips some weaker groups into bankruptcy.</p>
</div>
</div>
<h3 id="faq-what-about-the-yuan" class="card__title" itemprop="name">How does the recent China turmoil affect the Fed’s decision?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>In theory, the Fed makes its decision on raising rates based on its appraisals of domestic economic issues. However, with emerging markets accounting for 39 per cent of global GDP in nominal terms and 52 per cent in purchasing power parity terms, a US monetary policy that enfeebles emerging markets risks depressing global demand and therefore impacting US growth further down the line. This is particularly the case with China. In a specific sense, a Fed rate hike runs the risk of increasing the attractiveness of US-dollar assets relative to those denominated in renminbi, thus accelerating capital outflows from China and leaving Beijing with fewer resources to invest in US Treasury debt.</p>
</div>
</div>
<p></p>
<h3 class="section__subtitle"><span class="font-size-6">What about the UK?</span></h3>
<p></p>
<h3 id="faq-will-the-uk-follow" class="card__title" itemprop="name">Will the UK automatically follow the US in raising rates?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>There is no automatic or formal link between US and UK interest rates but the widespread expectation is that the Bank of England will be the next central bank after the US to raise rates. The UK’s economic recovery is well on track, with solid growth and a strong labour market.</p>
<h4 class="chart-title">The Bank of England typically follows the Federal Reserve's lead</h4>
<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291287?profile=original"><img class="align-full" src="http://storage.ning.com/topology/rest/1.0/file/get/1291287?profile=original" width="704"></a>Historically, US and UK market interest rates, as measured by government bond yields, have also moved in tandem. These are the rates, set by the financial markets that feed down into the real costs of borrowing for households and companies.</p>
<h4 class="chart-title">Bond yields move in tandem</h4>
<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291303?profile=original"><img class="align-full" src="http://storage.ning.com/topology/rest/1.0/file/get/1291303?profile=original" width="733"></a></p>
<span class="font-size-3"><strong>What are we expecting from UK interest rate rises?</strong></span>
</div>
<div itemprop="text"></div>
</div>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
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<p>Bank of England governor Mark Carney has stressed that while the next move in rates is likely to be upwards, the path of increases will be “limited and gradual”.</p>
<p>While refusing to be drawn on precise timing, Mr Carney said the decision of whether to start lifting rates was likely to come into “sharper relief” around the turn of the year. Analysts are not predicting the first rise until February at the earliest, with many pushing the timing back into the late spring.</p>
</div>
</div>
<p></p>
<h3 class="section__subtitle"><span class="font-size-6">The rest of the world</span></h3>
<p></p>
<h3 id="faq-what-about-other-central-banks" class="card__title" itemprop="name">Are all major central banks around the world thinking of raising interest rates?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>No. The Bank of England is widely expected to follow the Fed and raise rates, most likely some time in the new year. But as the prolonged weakness in oil prices continues to keep inflation low, many central banks in the rich world are expected to loosen monetary policy further, for example expanding their programmes of quantitative easing. Mario Draghi, president of the European Central Bank, paved the way for an extension of QE last week and the Bank of Japan may well decide to go the same way to bring inflation back to target. In China, the central bank may also cut rates further to stimulate growth. The outlook for emerging markets is harder to gauge: were a Fed hike to trigger turmoil across Africa, Asia and Latin America, countries there may choose to cut rates to help the economy, or increase them in order to dissuade investors from taking their money abroad.</p>
</div>
</div>
<h3 id="faq-what-about-emerging-markets" class="card__title" itemprop="name">Why would a rate rise in the US impact the emerging market countries?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>We have already seen the antecedents of the main impact: a stronger US dollar, backed by higher US interest rates, tends to depress the values of emerging market currencies at a time when many EM economies are already weakening and their currencies have already slumped against the greenback.The Fed’s rate rise could exacerbate the EM currency turmoil, and even help precipitate a full-blown crisis.</p>
</div>
</div>
<p></p>
<h3 class="section__subtitle"><span class="font-size-6">Jargon buster</span></h3>
<p></p>
<h3 id="faq-what-is-tightening" class="card__title" itemprop="name">What is <em>tightening</em> and <em>loosening</em>?</h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>When a central bank “loosens” or “eases” policy it essentially increases the supply of money in the economy and pushes down the cost of borrowing. This could be by lowering interest rates, or buying more assets with the aim of putting more money into circulation and encouraging greater economic activity.</p>
<p>“Tightening” is the opposite. If policymakers worry that an economy is begin to overheat, potentially generating too much inflation, they can tighten policy – such as raising the interest rate they charge banks to borrow from them, to make the cost of credit more expensive.</p>
<p>Changes to interest rates can take-up to 18 months to feed through into the real economy.</p>
</div>
</div>
<h3 id="faq-what-is-monetary-policy" class="card__title" itemprop="name"><span class="font-size-6">What is monetary policy?</span></h3>
<div class="card__body" itemprop="suggestedAnswer acceptedAnswer" itemscope="" itemtype="http://schema.org/Answer">
<div itemprop="text">
<p>Central bankers control more than just interest rates. “Monetary policy” is a broad brush term for a whole range of actions, including things like selling or buying assets such as government bonds, raising or reducing the amount of capital banks need to hold against liabilities, and raising or lowering interest rates.</p>
<p>All of these actions impact the cost and supply of money in an economy which are the main levers central banks use to try and keep inflation at its target level and the economy growing at a sustainable speed.</p>
<p>Changes in monetary policy can take-up to 18 months to feed through into the real economy.</p>
<p>See more at <a href="http://ig.ft.com/sites/when-rates-rise/#faq" target="_blank">ft.com</a></p>
</div>
</div>
<p></p></div>Peter Schiff on China, Rates and Housing. Have We Recovered Yethttp://stockbuz.ning.com/articles/peter-schiff-on-china-rates-and-housing-have-we-recovered-yet2015-08-23T16:18:10.000Z2015-08-23T16:18:10.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>(Edited 2:00pm)  I especially enjoy the part when the commentator withdrew his request for an interview after Schiff refused to blame everything on China.  Yes, MSM wants us to believe it's all China's fault.  Don't drink the koolaid.  Use your head.</p>
<p><iframe width="560" height="315" src="https://www.youtube.com/embed/4b2UGHHaZRg" frameborder="0" allowfullscreen=""></iframe></p>
<p>Hat tip Ed</p>
</div>Federal Reserve Ready To Hike Rates But Bond Market Is Skepticalhttp://stockbuz.ning.com/articles/federal-reserve-ready-to-hike-rates-but-bond-market-is-skeptical2015-08-09T12:52:33.000Z2015-08-09T12:52:33.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><em>While main stream media does their level best to keep us hugging our equities, they seem to ignore the fact that quantitative easing ran the market up from 2009 and while the economy has come a long way since the bottom, maybe, just maybe, it's strong enough to sustain us, but not equities at elevated levels.</em></p>
<p>Federal Reserve officials have signaled they think the economy is robust enough to withstand a round of interest-rate rises starting this year. But the bond market still seems skeptical.</p>
<p>While yields on short-term Treasury notes have started moving higher in anticipation of an interest-rate increase as early as September, yields on longer-term debt have remained stubbornly low. That is a sign that many investors are still doubtful about the health of the economy, and the ability of the Fed to keep raising rates without jeopardizing growth.</p>
<p>On Tuesday, yields on short-term U.S. Treasury notes rose <a href="http://www.wsj.com/articles/atlanta-feds-lockhart-fed-is-close-to-being-ready-to-raise-short-term-rates-1438709252" target="_self" class="icon none">after a Fed official sounded the latest all clear</a> for a rate rise as soon as September. The federal-funds overnight lending target has been near zero since 2008. Short-term yields <a href="http://www.wsj.com/articles/u-s-government-bonds-pare-price-loss-on-jobs-data-1438780387" target="_self" class="icon none">continued to rise Wednesday</a>.</p>
<p>But the reaction in longer-term bonds was more muted. That left the gap between the yields on two- and 10-year notes at its slimmest level since April.</p>
<p>The collision between rising short-term rates and soft longer-term rates underscores the growing uncertainty about the capacity of the U.S. economy to withstand even a minor rise in borrowing costs, even as Fed officials signal a willingness to consider their first interest-rate increase since 2006.</p>
<p>The Fed raising interest rates against a backdrop of sluggish global growth may be “premature,’’ said Erik Schiller, senior portfolio manager at Prudential Financial Inc.’s fixed-income unit, which has $560 billion in assets under management. Tightening monetary policy “could only help to slow the U.S. economy and pressure inflation expectations down,’’ which would make longer-dated bonds more attractive to buy, he said.</p>
<p>The persistently low yields on longer-term debt has continued to confound many investors who anticipated the 10-year yield may move toward 3% by the end of this year, from 2.211% on Tuesday.</p>
<p>“What I am missing?” asked Jason Evans, co-founder of hedge fund NineAlpha Capital. “The bond market may be telling me something that I am not aware of, such as growth, inflation, China or stocks.”</p>
<p>Mr. Evans says he still expects the 10-year yield to rise to somewhere between 2.5% and 2.75% at the end of the year. But he adds that he would change his views if the yield tumbles more from here.</p>
<p>The yield on the two-year U.S. Treasury note hit 0.728% in late afternoon trading Tuesday, the highest level since June and just shy of the highest this year, and compared with 0.665% on Monday. Yields rise as prices fall.</p>
<p><a target="_blank" href="http://si.wsj.net/public/resources/images/MI-CK993_CRDLED_9U_20150804183037.jpg"><img class="align-right" src="http://si.wsj.net/public/resources/images/MI-CK993_CRDLED_9U_20150804183037.jpg?width=400" width="400" /></a></p>
<p>The move came after Federal Reserve Bank of Atlanta President Dennis Lockhart said in an interview with The Wall Street Journal on Tuesday that the economy is ready for the first increase in short-term interest rates in more than nine years. Mr. Lockhart, who is a voter on the Fed’s policy-setting committee this year, said it would take a significant deterioration in the data to convince him not to move in September.</p>
<p>The yield on the benchmark 10-year Treasury note still is hovering near a two-month low. The yield premium to hold the benchmark 10-year Treasury note instead of the two-year note fell to 1.48 percentage point, the lowest level since April.</p>
<p>Fed officials signaled in their recent monetary-policy meeting in late July that they were on course to step away from crisis-era monetary stimulus as their outlook for the labor market brightened.</p>
<p>But softer energy prices have been heightening concerns over China’s economy while reducing U.S. inflation expectations. A stronger U.S. dollar is hurting U.S. exports and lowered prices of imported goods. These factors make the Fed more difficult to push up inflation to its 2% target in the medium term.</p>
<p>The 10-year break-even rate, the yield spread between a 10-year Treasury note and a 10-year Treasury inflation-protected security suggests investors expect the U.S. inflation rate to be running at an annualized 1.70% on average within a decade. A month ago it was 1.91%.</p>
<p>Money managers say they aren’t worried about a spike in the 10-year yield because the Fed’s tightening likely will be shallow and slow, baring big upside surprise from either the economic growth or wage inflation.</p>
<p>“I think the Fed can still begin to lift the policy rate from emergency levels at a very slow pace without causing meltdown and panic,” said Christopher Sullivan, who oversees $2.4 billion as chief investment officer at the United Nations Federal Credit Union in New York.</p>
<p>Still, bond investors are mindful of 2014, when bond yields tumbled even as the U.S. outlook improved and the central bank gradually phased out its bond purchases. Instead, sluggish growth overseas and U.S. bonds’ more attractive yields than many other markets sent the 10-year Treasury yield falling during the course of last year.</p>
<p>Courtesy of <a href="http://www.wsj.com/articles/the-federal-reserve-is-ready-for-rate-hikes-but-bond-market-is-skeptical-1438730547" target="_blank">WSJ</a></p>
</div>Now Do You Believe? Sell In May Began Earlyhttp://stockbuz.ning.com/articles/now-do-you-believe-sell-in-may-began-early2015-04-18T22:26:50.000Z2015-04-18T22:26:50.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291220?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291220?profile=RESIZE_1024x1024" width="750"></a>The majority of sector ETFs closed their week below their 50d with energy having filled the gap.....and found sellers waiting there.</p>
<p>SPX itself found sellers at $2100 (clearly we weren't the only ones selling) which is 17x earnings. More and more are <em>accepting</em> reality that earnings have dropped the most in six years and the Fed (with no QE) will most likely begin to slowly raise interest rates in September. Don't believe me, just ask <a href="http://www.newsmax.com/Finance/StreetTalk/Barclays-earnings-S-P-500-estimates/2015/04/17/id/639210/" target="_blank">Barclays.</a></p>
<ul>
<li>US dollar found buyers at the 10week sma, prior support. Yes, they're taking profits. Will it continue? It's nonetheless <em>weighing</em> on U.S. earnings.</li>
<li><a href="http://news.yahoo.com/asian-shares-fresh-seven-high-look-past-weak-003907668.html" target="_blank">China</a> allowed further stocks to be shorted and talked of tightening margin lending. They hit the sell button.</li>
<li>Utilities are being held by their 50d - won't raise much if rates are going up.</li>
<li>Transports are being held by their 20d bu the 50d is just overhead; waiting.</li>
<li>For months money has been flowing into overseas markets searching for yield.</li>
<li>Not to Greece though (although Putin lent them $5B this morning)</li>
</ul>
<p>Well hopefully you didn't buy the top or if you do, you're using Calls rather than common (lose less is wrong).</p>
<p>Bottom line if you're a fund manager, May is right around the corner. Do you want to wait around?</p>
<p>I truly feel we are in the beginning of a solid correction and if you're not hedged, I hope you have raised your cash level. </p></div>U.S. Dollar Updatehttp://stockbuz.ning.com/articles/u-s-dollar2015-02-23T15:16:03.000Z2015-02-23T15:16:03.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291203?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291203?profile=RESIZE_480x480" width="375"></a>As global central banks continue their race to devalue their currency in hopes of supporting their own weak economies (most recently Bank of Israel unexpectedly cutting their base interest rate overnight by 15bps from 25bp to 10bp) global money flows continue to seek safe haven in the U.S. dollar. And everyone agrees there is no end in sight near term.</p>
<p>In fact the daily chart is in a beautifully, tight bollinger band squeeze which I feel is going to break even higher.</p>
<p>Pressure looks to continue for large cap multinationals as currency strength will continue to pressure balance sheets with overseas sales. A great time for the consumer to take a vacation across the pond however as your greenback outperforms every currency out there.</p>
<p>Bragging rights in a weak economic recovery. You have to take it when you can get it.</p>
<p></p>
<p></p></div>Are Profit Margins Sustainable: RBChttp://stockbuz.ning.com/articles/are-profit-margins-sustainable-rbc2014-10-30T21:59:06.000Z2014-10-30T21:59:06.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290921?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1290921?profile=original" width="422"></a>Stock markets have enjoyed a banner half-decade, forcefully reclaiming the ground lost to the financial crisis, and then some. This vigorous performance has occurred thanks, above all else, to two key enablers: surging earnings and recovering valuations. On the surface, there is nothing especially questionable about either. Earnings naturally rise as economies grow, and valuations recover as risk aversion fades.</p>
<p>However, a closer examination reveals a significant vulnerability within this cozy equation. Corporate earnings growth has been, in a sense, too good – persistently outpacing both revenues and the economy. This has driven profit margins to multi-decade highs.</p>
<p>Worryingly, profit margins have long been assumed to be mean-reverting, arguing that these juicy gains may eventually have to reverse. Such a scenario would necessitate an eye-watering one-third decline in the S&P 500. With stakes as big as these, a clear sense of the downside risk is imperative. This report evaluates the seriousness of the threat by seeking to understand the forces that have propelled profit margins higher, and their likely direction in the future. In so doing, we find that a large number of previously favorable profit-margin enablers are on the cusp of reversing, including the advantages of low borrowing costs, deleveraging, soft wage growth and deferred capital investment. The decline in these drivers suggests that profit margins could suffer.</p>
<p>Fortunately, there are a number of under-appreciated structural forces that continue to support high (and in some cases, even rising) profit margins, including globalization, automation and a compositional shift toward higher-margin sectors.</p>
<p>Grab a cup of coffee (maybe two), sit back and read the full <a href="http://media.rbcgam.com/pdf/economic-compass/rbc-gam-economic-compass-profit-margins-201409.pdf" target="_blank">RBC PDF here.</a></p></div>Looking Back At The Markethttp://stockbuz.ning.com/articles/looking-back-at-the-market2014-10-05T23:01:03.000Z2014-10-05T23:01:03.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_blank" href="http://www.frugal-cafe.com/public_html/frugal-blog/frugal-cafe-blogzone/wp-content/uploads/2011/10/halloween-european-debt-crisis-political-cartoon.jpg"><img class="align-left" src="http://www.frugal-cafe.com/public_html/frugal-blog/frugal-cafe-blogzone/wp-content/uploads/2011/10/halloween-european-debt-crisis-political-cartoon.jpg?width=500" width="500" /></a>The ECB left its key lending rates at record low levels, and the four-week moving average for initial claims is at an eight-year low.  That sounds like a pretty good setup for a stock market that worries about earnings prospects tied to a stronger dollar, loves the thought of central bank policy rates holding near the zero bound, and is anxious to see evidence the U.S. economy is gaining momentum.<br />
<br />
Despite the setup, it has been a swing and a miss so far for the stock market, which has once again been greeted with steady, and broad-based, selling pressure.<br />
<br />
ECB President Mario Draghi is getting a lot of blame for the disappointing price action based on reports that his presentation regarding the ECB's asset-backed securities purchase program was lacking and the impression from today's press conference that the ECB's ability to change the economic dynamic in the eurozone is also lacking.<br />
<br />
There is some merit to the latter claim given the seeming lack of urgency to implement structural reforms in the eurozone, yet that is just one element that has kept buyers on the sideline.<br />
<br />
The primary element is that the stock market just isn't acting well.  That's a simple deduction we know, but so many participants have been conditioned to expect a strong, buy-the-dip trade on just about any dip that the lack of that trade has been off-putting and interpreted as a deeper-seated effort to reduce risk exposure.<br />
<br />
With the S&P 500 down nearly 4.0% over the last month and the Dow flirting with turning negative for the year, the narrative that the stock market is oversold and that this pullback is a "healthy" pullback is apt to start gathering some steam. <br />
<br />
The setup is there to come back and buy on the recent, big dip: the Fed isn't going to raise interest rates anytime soon, we'll soon see that earnings grew once again in the third quarter and probably grew more than expected, and there are reportedly a lot of underperforming money managers chomping at the bit to buy on a pullback.<br />
<br />
The stock market is hitting an important inflection point.  The failure to live up to the buy-the-dip expectations needs to be eradicated soon or October could turn spooky and it won't have anything to do with Halloween. </p>
<div style="overflow: hidden; color: #000000; background-color: #ffffff; text-align: left; text-decoration: none;">Courtesy of <a href="http://www.briefing.com/Investor/PopupPages/ArticlePopup.aspx?ArticleId=IN20141002120807TALKX#ixzz3FJXYKdMk" target="_blank">Briefing.com</a></div>
</div>If The 10 Year Were A Stockhttp://stockbuz.ning.com/articles/if-the-10-year-were-a-stock2014-09-12T14:26:34.000Z2014-09-12T14:26:34.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290893?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1290893?profile=RESIZE_1024x1024" width="562"></a>I'd be trading this bad boy to the long side. In this seven year weekly chart, not only has it broken my three trend line rule, there was positive MACD convergence (as shorts began to massively cover) and the 200week SMA which was prior resistance, has now become support. </p>
<p>It certainly appears that the "low" in low rates was in in 2013.</p>
<p>I should also note that the monthly chart is deeply oversold. At some point, you simply run out of sellers.</p>
<p>I've long said that when in mortgage banking, we watched the 10yr. each week for direction of rates and we completely ignored the Fed raising or lowering rates. They were a laggard; the 10yr was already there.</p>
<p>Yep. If this were a stock, I'd be trading it long, buying at support or out of the short side completely. Maybe not expecting anything spectacular in terms of upside but ROC would indicate no heavy selling; short covering more than anything else. </p>
<p>I believe we've entered the phase in our bull market where "good news" is now bad news to the market; as a reinforcement that QE will no longer be extended and the market has to sink or swim without their safety "floaties". Major gains have been made in the last five years. Take profits, do not trade unless you're nimble and wait for some major support to come in. </p>
<p>The dollar strength, with Russian sanctions and Scottish election (to determine if they leave the UK) approaching next week, should buoy it for the time being. September is the end of fiscal year for most funds. Again they'll be taking SPX (and bond) profits and shifting allocations. </p>
<p>I see no reason to be a super hero. Some names may pop and that's great but why risk it? We will see support at some point. Just how low we go is anyone's guess. No one has that answer. I've taken profits in many names and will sit back and wait.............for good, low risk entries.</p></div>10 Year U.S. Treasuryhttp://stockbuz.ning.com/articles/10-year-u-s-treasury2014-06-04T04:00:05.000Z2014-06-04T04:00:05.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290755?profile=original"><img class="align-center" src="http://storage.ning.com/topology/rest/1.0/file/get/1290755?profile=RESIZE_1024x1024" width="750"></a></p></div>