As the market sails to new highs, the floodgates have broken open.
Money is pouring like crazy into stocks, which is of course classic investor psychology. Nobody buys low. People like to buy high.
In Goldman Sachs’ latest “Weekly Kickstart” note, strategist David Kostin relays the discussion the firm is having with clients. The discussions are all about retail fund flows, and the rush of money into stocks.
Read more: http://www.businessinsider.com/everyones-talking-about-the-huge-stampede-of-cash-into-the-stock-market-2013-7#ixzz2ZmI2sfxe
The Economy Is Still A Huge Disappointment
Here’s the thing.
People keep talking about the Fed Exit, and the economy achieving escape velocity, and the jobs market returning to normal.
But a lot of the data just isn’t that impressive.
For the second quarter, for example, a lot of the estimates are for growth under 1%.
This morning, Ben Casselman at WSJ takes a look at some of the weak US growth numbers:
There also are signs that consumers—whose spending has helped prop up the economy for much of the past year—are beginning to tighten their belts. Retail sales grew a paltry 0.4% in June, Commerce Department figures showed, and would have been even worse if higher gasoline prices hadn’t forced drivers to spend more at the pump.
“This year is proving to be more challenging than we had originally planned,” Howard Levine, chairman and chief executive of discount retailer Family Dollar Stores Inc., told investors earlier this month. “The consumer is just more challenged than we had anticipated.”
Sales at restaurants—a key source of recent job growth, adding more than 150,000 positions over the past three months—tumbled last month, suggesting consumers could be pulling back on discretionary spending.
Read more: http://www.businessinsider.com/economy-looking-unimpressive-2013-7#ixzz2ZmIC5GxR
Four-week rally in US crude rekindles ‘flash crash’ fears
The risk of a disorderly decline in benchmark U.S. crude futures is growing after a four-week rally sent prices to 16-month highs and money managers amassed record bullish bets, defying an economic slowdown in China and the North American shale energy supply boom.
WTI (West Texas Intermediate, the oil grade underpinning the U.S. crude futures benchmark) on Friday flipped to a slight premium over its Brent counterpart for the first time in three years, reflecting stronger refiner demand, U.S. economic optimism and efforts to drain the supply glut at the WTI oil storage hub of Cushing, Oklahoma. Brent held a mere seven cents a barrel premium over its U.S. rival at $108.39 early on Monday morning.
http://www.cnbc.com/id/100902539
McDonalds Misses Revenue And Earnings Due To “Economic Uncertainty And Pressured Consumer Spending”
It must have been the weather: at least that is what we expect McDonalds will blame the latest (in a long series) of Q2 revenue misses, but also earnings as moments ago the fast food giant reported $1.38 EPS in Q2 earnings, while revenue of $7.08 billion missed expectations of $7.09 billion. The internals were just as ugly: Q2 comp sales rose 1% on expectations of a +1.5% print; Europe was down -0.1% with the bulk of the hit coming strangely enough from Germany and France. The rest was in line, with global comp sales up 1% vs Exp. 1%, however this being the weakest of all categories it is hardly offsetting what is becoming increasing a weak lower-end consumer story, as well as one of FX headwinds with forex eating into Q2 EPS by $0.02.
Sadly, after reading the press release it appears the neither cold or hot spring/summer weather was at scapegoated fault (as it was for Coke and Google): “McDonald’s results for the quarter reflect our efforts to strengthen our business momentum for the long-term,” said McDonald’s President and Chief Executive Officer Don Thompson. “We remain strategically focused on the global growth priorities that help us better serve our customers. While the informal eating out market remains challenging and economic uncertainty is pressuring consumer spending, we’re continuing to differentiate the McDonald’s experience by uniting consumer insights, innovation and execution.” Innovation in the $1 meal? Good luck. More importantly, someone actually told the truth about end-demand, and the fact that consumer spending is deteriorating. Unpossible.
http://www.zerohedge.com/news/2013-07-22/mcdonalds-misses-revenue-and-earnings-due-economic-uncertainty-and-pressured-consume
Euro Area Government Debt Rises To New Record High
While the European economy may be moving in a straight line from upper left to lower right, the same can not be said for the level of debt in Europe, which has taken on the inverse trajectory. As per the just released quarterly update of Euro area government debt, in Q1 2013, total government debt in Europe as a % of GDP just hit a new all time high of 92.2%. This compares to 90.6% in the previous quarter, and up from 88.2% in Q1 2012.
The proud Q1 debt-to-GDP outliers, where the local economies are expected to continue plunging and thus send the stock markets (if mostly that in the US) surging, are the following:
- Euroarea: 92.2%, up from 88.2% a year ago
- Greece: 160.5%, up from 136.5% a year ago
- Italy: 130.3%; up from 123.8% a year ago
- Portugal: 127.2%, up from 112.3% a year ago
- Ireland: 125.1%, up from 106.8% a year ago
- Spain: 88.2%, up from 73.0% a year ago
- Netherlands: 72.0%, up from 66.7% a year ago
European Banks Brace for Losses on Detroit
http://investmentwatchblog.com/european-banks-brace-for-losses-on-detroit-apparently-goldman-sachs-is-doing-nothing-but-making-in-detroit/
Euro-zone Deflation Warning for U.S.
History shows that the U.S. should pay attention to economies in Europe
The economy has been sluggish for five years. There’s no shortage of chatter about “why,” yet few observers mention deflation.
One exception is a hedge fund manager who spoke up at the recent Milken Institute Global Conference.
http://www.marketoracle.co.uk/Article41510.html
Here Come Those Municipal Defaults That Everyone Said Couldn’t Happen, Pt 2
http://www.zerohedge.com/contributed/2013-07-22/here-come-those-municipal-defaults-everyone-said-couldnt-happen-pt-2
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