BMO Capital’s Brian Belski has increasingly sounded alarms as the stock market blew past his once-bullish targets.
In his latest note to clients, Belski reiterates his thesis that the big investors are only buying into this rally now because they’ve been missing out.
He believes this will only make things worse for everyone else should things turn south in a big way.
“[W]e continue to believe that most institutional investors are not prepared for a potential period of market weakness,” wrote Belski. “Therefore, we believe investors should prepare for more back-and-forth action this summer — not just up and not just down — as the market sifts through what is likely to be choppy fundamental and economic data in the coming months.”
Read more: http://www.businessinsider.com/belski-investors-are-not-prepared-for-volatility-2013-6#ixzz2VkBWdI1e
Morici to Moneynews: Growth ‘Will Be Weaker’ Despite Jobs Burst
“The economy is slowing down a bit,” Morici told Newsmax TV in an exclusive interview.
“If you look at average jobs growth over the last three months or so, it seems as though we’ve come down a little bit. Not to an alarming pace, but second-quarter growth will be weaker,” he said.
http://www.moneynews.com/StreetTalk/peter-morici-economy-growth-jobs/2013/06/07/id/508753
Cash Home Sales, Flipping, Offer More Signs of Housing Bubble; Housing Insanity Stage 2
Read more at http://globaleconomicanalysis.blogspot.com/2013/06/cash-home-sales-flipping-offer-more.html#fo5oxxTzHl2RV8qd.99
Chinese Lending Slows As Concerns Of A Credit Crisis Loom
Could this be good for China’s financial health?
The latest lending data out of China missed expectations.
New outstanding loans fell to 667 billion yuan, from 793 billion yuan in April. This was also short expectations of 815 billion yuan.
Outstanding loans were up 14.5% in May, down from 14.9% in April.
Total social financing (TSF) — financing available to the economy from the financial sector — fell to 1.190 trillion yuan, down from 1.747 trillion yuan in April. This was shy of expectations for 1.6 trillion yuan. TSF eased to 22.1% in May, from 22.3% the previous month.
Meanwhile, M2, a broad measure of money supply, was up 15.8% in May, down from 16.1% in April.
“These lower than expected credit data will likely trigger market concerns about monetary tightening when economic momentum stays weak,” wrote Bank of America’s Ting Lu.
http://www.businessinsider.com/chinese-lending-growth-slows-in-may-2013-6
The latest lending data out of China missed expectations.
New outstanding loans fell to 667 billion yuan, from 793 billion yuan in April. This was also short expectations of 815 billion yuan.
Outstanding loans were up 14.5% in May, down from 14.9% in April.
Total social financing (TSF) — financing available to the economy from the financial sector — fell to 1.190 trillion yuan, down from 1.747 trillion yuan in April. This was shy of expectations for 1.6 trillion yuan. TSF eased to 22.1% in May, from 22.3% the previous month.
Meanwhile, M2, a broad measure of money supply, was up 15.8% in May, down from 16.1% in April.
“These lower than expected credit data will likely trigger market concerns about monetary tightening when economic momentum stays weak,” wrote Bank of America’s Ting Lu.
http://www.businessinsider.com/chinese-lending-growth-slows-in-may-2013-6
China Data Dump: Moderation by No Stimulus Response
The biggest surprise was in the bank lending data. New yuan loans
extended in May slowed to 667.4 bln from 792.9 bln in April. The
Bloomberg consensus anticipated CNY850 bln in new loans. Aggregate
social financing, the broadest measures, picking up at least parts of
the shadow banking sector, slowed to CNY1.19 trillion from CNY1.75
trillion. The consensus was for CNY1.6 trillion.
Signs point to a slowing of capital inflows into China. Our point is that an important part of those inflows are not from foreign investors, but from Chinese investors themselves. The yuan balances in local banks is understood to be a gauge of these capital inflows. They were CNY294 bln (almost $50 bln) in April and appear to have slowed almost two-thirds in May.
http://www.zerohedge.com/contributed/2013-06-09/china-data-dump-moderation-no-stimulus-response
Signs point to a slowing of capital inflows into China. Our point is that an important part of those inflows are not from foreign investors, but from Chinese investors themselves. The yuan balances in local banks is understood to be a gauge of these capital inflows. They were CNY294 bln (almost $50 bln) in April and appear to have slowed almost two-thirds in May.
http://www.zerohedge.com/contributed/2013-06-09/china-data-dump-moderation-no-stimulus-response
China’s Latest Economic Data Dump Stunk
First, industrial production climbed 9.2% on the year, slightly below expectations for a 9.4% rise. Industrial production in May was led by heavy industries, with steel products up 11.3% year-over-year (YoY), up from 8.1% in April. Auto production slowed to 15.7%, from 18.3%, according to Bank of America’s Ting Lu.
Second, fixed asset investment (FAI) was up 19.9% on the year, and year-to-date FAI was up 20.4% on the slightly below expectations for a 20.5% gain. Remember FAI is a good gauge of a country’s investment activity.
A breakdown of FAI activity showed that manufacturing FAI eased to 16.5%, from 17.9% because of “sluggish” external demand. Railway FAI slowed significantly to 24.2% YoY, from 62% in April. But year-to-date railway FAI was up 24.5%, compared with -41.6% last year for the same period. Planned investment, which is a leading indicator of FAI eased to 15.4%, from 17.9%. And finally, property FAI fell to 19.4%, from 23.2% the previous month.
For the month of May, Lu writes that the 2.9% fall in producer prices could cause real FAI to rise a bit.
Third, retail sales climbed 12.9% on the year, in line with expectations. Industries impacted by the government’s crackdown on corruption, like the restaurant industry saw revenue rise 9.2%, from 7.9% in April. Gold and jewelry sales were up 38.4% because of weakness in gold prices.
Read more: http://www.businessinsider.com/may-chinese-data-suggest-sluggish-growth-2013-6#ixzz2VkCNr0qF
The ECB’s “Unlimited, Open-Ended” Bond Purchase Program Gets A €524 Billion LimitFirst, industrial production climbed 9.2% on the year, slightly below expectations for a 9.4% rise. Industrial production in May was led by heavy industries, with steel products up 11.3% year-over-year (YoY), up from 8.1% in April. Auto production slowed to 15.7%, from 18.3%, according to Bank of America’s Ting Lu.
Second, fixed asset investment (FAI) was up 19.9% on the year, and year-to-date FAI was up 20.4% on the slightly below expectations for a 20.5% gain. Remember FAI is a good gauge of a country’s investment activity.
A breakdown of FAI activity showed that manufacturing FAI eased to 16.5%, from 17.9% because of “sluggish” external demand. Railway FAI slowed significantly to 24.2% YoY, from 62% in April. But year-to-date railway FAI was up 24.5%, compared with -41.6% last year for the same period. Planned investment, which is a leading indicator of FAI eased to 15.4%, from 17.9%. And finally, property FAI fell to 19.4%, from 23.2% the previous month.
For the month of May, Lu writes that the 2.9% fall in producer prices could cause real FAI to rise a bit.
Third, retail sales climbed 12.9% on the year, in line with expectations. Industries impacted by the government’s crackdown on corruption, like the restaurant industry saw revenue rise 9.2%, from 7.9% in April. Gold and jewelry sales were up 38.4% because of weakness in gold prices.
Read more: http://www.businessinsider.com/may-chinese-data-suggest-sluggish-growth-2013-6#ixzz2VkCNr0qF
One year ago, the ECB faced with an imminent collapse of the house of peripheral cards literally made up a bazooka: one so big and loud the market had no choice but to assume Draghi and company were not joking and actually knew what they were doing – it was the Outright Monetary Transactions (OMT), the successor to the SMP program, which was unique in that it was open-ended and unlimited. It was literally, “the kitchen sink” conceived to put a halt to the relentless selling which last July sent peripheral bond yields to record wides by instilling the fear of god, or in this case his monetary messenger on earth, Mario Draghi into the hearts of bond sellers.
Unfortunately, like everything else in Europe, this was merely the latest ad hoc made up rescue mechanism, and which as Mario Draghi reiterated on Thursday, still has no legal term sheet (but one is coming out “shortly”, as he said in March and every time before that).
However, as we got closer to June 11/12, the date when the German Constitutional Court will conduct a public hearing on the various challenges to the ESM and OMT, the ECB would have no choice but to disclose more details about the real terms of the OMT to assure smooth passage of the OMT, and not to jeopardize the tenuous balance in Europe where things are once again going bump in the night with bond yields suddenly blowing wider on fears the Japanese bond carry trade is set to unwind. And if the validity and credibility of the OMT is also suddenly questioned, then Europe will go right back to imploding right before our eyes all over again.
The first such notable detail comes courtesy of the FAZ this morning, which reports that “in fear of the judgment of the Federal Constitutional Court, the European Central Bank (ECB) has revealed for the first time the boundaries of their controversial bond buying program… ECB President Mario Draghi announced last year, if necessary, that unlimited government bonds of distressed euro countries would be monetized to save the euro. Meanwhile, however, the central bank has limited this program to a maximum volume of €524 billion and also communicated this to the court.” This is the maximum allowable purchases of Spanish, Italian, Irish and Portuguese bonds.
http://www.zerohedge.com/news/2013-06-09/ecbs-unlimited-open-ended-bond-purchase-program-gets-%E2%82%AC524-billion-limit
Japan’s Ruling LDP Party Joins JGBi Market In Fears that “Abenomics Could Fail”
With JPY back around 98 and the Nikkei 225 indicating further advances, perhaps the fears in the market are mis-represented – at least that’s what the other Goldman desk would have you believe.
But, as The Japan Times reports, even glorious leader Abe’s own LDP party are beginning to voice concerns that all this fluff is – well – just that. As we outlined here, the market is already concerned, domestic funds were very unwilling to partake of the exuberance – since they know the limitations of QE in their 20-year balance sheet recession environment – and as Goldman notes, the fact that the JGBi expected inflation level - a now symbolic indicator of policy success since Kuroda quoted it - is now suddenly moving counter to its previous extended trend could possibly indicate the markets’ early signal questioning the credibility of the BOJ policy.
The recent stock price collapse, Lower House LDP lawmakers noted “shows the market expects little (of Abenomics).” The sky-high approval ratings (and business confidence) for the Abe Cabinet have been bolstered by the resurgence of the benchmark Nikkei since ‘Abe(g)nomics began. The stock market’s downturn, therefore, has created a sense of crisis among some members of the ruling LDP, and while they are likely to give the nod to Abe’s 3rd arrow growth strategy, many are pushing for significant fiscal expansion because “Abenomics could fail.”
http://www.zerohedge.com/news/2013-06-09/japans-ruling-ldp-party-joins-jgbi-market-fears-abenomics-could-fail
MAULDIN: I’m So Sure Japan Is Screwed That I’m Converting My Mortgage Into Yen
Read more: http://www.businessinsider.com/mauldin-mortgage-in-yen-2013-6#ixzz2VkCiz442
Greenspan: QE Tapering Needs to ‘Get Moving’ Regardless of Economy
The Federal Reserve must taper its program of purchasing $85 billion in assets each month whether or not the U.S. economy is strong enough to handle it, former Fed Chairman Alan Greenspan asserts.
http://www.moneynews.com/FinanceNews/Greenspan-Fed-taper-QE/2013/06/07/id/508660
Be Careful With the VIX Signal
http://www.zerohedge.com/contributed/2013-06-09/be-careful-vix-signal
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