06-02-12 Member Guest Video, the Abyss Beckons?

Guests, you may wish to view last weekends video on the next key Fib level below for $SPX $SPY:

 

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One more reason to own $AAPL, and not $GOOG.

Thanks to the iPad's dominant share of tablet browsing, iOS (AAPL) grew its share of total mobile browsing to 62% in May, NetMarketShare estimates. That's more than 3x the 19.7% share estimated for Android (GOOG), in spite of its solid lead in smartphone shipments. Even if one assumes NetMarketShare's methodology is imperfect, the figures drive home Google's need to improve its tablet position, given its huge iOS search revenue-sharing payments to Apple

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The data points that matter: our take at bottom

 The ECRI Weekly Leading Index falls to 122.4 in the week ended May 25 from 123.0 previously (revised down from 123.1). It's the lowest level since early January and the annualized growth rate declines to -0.6% from 0.1% previously. The ECRI director has been the subject of a bit of ridicule for his insistence the U.S. was headed for a slowdown.

The JPMorgan Global PMI for May falls to 50.6 from 51.4 in previously. It's the lowest read in 5 months for the index. "Growth of total order books remained lackluster and international trade volumes posted a marginal decline," says JPM's David Hensley.

 Canada's May PMI rises to 54.7 vs. expectations of 54.3 and 53.3 previously. It's the biggest jump for the series since September. RBC (the report's author) notes particularly strong gains in employment and new export orders (which rose at the fastest pace since March 2011). The loonie remains sharply lower vs. the dollar as risk markets sell off worldwide.

 The ISM report may have missed expectations, but the "internals" (defined as New Orders minus Inventory) continue to improve rather smartly. It's likely a good part of the decline in the headline number came from a big drop in prices paid (from 61 to 47.5).

An investigation of the China's Industrial Bank by the National Audit Office finds the bank lent money for land acquisition to firms not in the real estate business, and for trade finance to companies not in the business of trading. The books are a "mess." "Basically what would happen when banks were told to lend as much as possible," writes Also Sprach Analyst.

The symbol for the Greek Drachma (Post euro) shows up on Bloomberg terminals. Bloomberg says its appearance is "an internal function which is set up to test." 

 China' official May PMI falls to 50.4 vs. 52.2 expected and from 53.3 previously. It's the biggest drop in 28 months and marks a bit of catching up for the official measure, which came in substantially higher than the HSBC read in March and April. 

ECRI negative this am: my take, slowdown or recession, doesn't matter.. we're stuck in mud for now..Cash, only DTL Focus Worksheet strongest stocks holding support, and REITs for me..for the summer... if we rally, I'll join, but time frames shorter, much shorter... 

... don't want many early cycle Industrials and Materials... yet ... 

... Greece vote on June 17, EU summit a couple weeks after and  SCOTUS vote on n'Obamacare matter ... at end of June ... 

CASH on hand makes sense.... with the DTL FW favs...

PS: China may come out with stimulus over weekend... but can't expect ...

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Notes to note:

IMF head Lagarde tells The Guardian her agency has no intention of easing the terms of Greece's bailout package. Greeks need to help themselves by paying their taxes, she says, adding she has more sympathy for poor African children than Greek ones - interesting sentiments from one who was part of the regime that oversaw hundreds of billions transferred to financial institutions in the aftermath of the GFC.


May has been a truly awful month for stocks. How awful? The Dow has enjoyed only four up days so far this month, the first month with so few positive trading days since September 1903. Recent historydoesn't offer much hope for near-term relief, as the S&P has shed more than 2% during the four trading days after Memorial Day in each of the last two years.


It ain't that complicated:
Housing prices in just 2 of the 20 largest U.S. metro areas have returned to 2006 levels - Dallas and Houston. Oil? Luck? Perhaps, but a Texas law requiring any homeowner refinancing a mortgage or taking out a home equity loan to have at least 20% equity in their home may have helped shield the state from at least part of the housing bust.


And remember: Obamacare's fate is in the hands of the executioners late June...


http://seekingalpha.com/currents/all


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05-27-12 $SPX $SPY Fibonacci Trend Analysis, what's the downside risk?

Bank runs coming in EU? Hard to argue against.

http://www.businessinsider.com/jim-cramer-im-predicting-bank-runs-in-spain-and-italy-in-the-next-few-weeks-2012-5

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05-19-12 $SPY $SPX freefall? $AGNC pays 16% like clockwork, not risk free

05-13-12 Guest Video, IF Its Sell in May, What to Do? One Idea $AGNC

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Are Mortgage REITs safe? Should we load up if "Sell in May and Go Away" is here? One view follows. (The founder of this site has been long mortgage REITs since 2009)

"BREAKINGVIEWS-U.S. mortgage vehicles need to come out of shadows

3:37 pm ET 05/08/2012 - Reuters

(The authors are Reuters Breakingviews columnists. The opinions expressed are their own.)

By Agnes T. Crane and Martin Hutchinson

NEW YORK, May 8 (Reuters Breakingviews) - The Federal Reserve's low interest rates are manna for investors borrowing to buy other assets. U.S. mortgage real estate investment trusts (REITs), which invest in home loan bonds guaranteed by Fannie Mae and Freddie Mac, are a case in point. But the sector that holds about $265 billion in mortgage bonds relies on short-term repo borrowing - widely exposed as dangerous in the 2008 crisis. Something needs to give.

Investors in mortgage REITs like their double-digit dividend yields - especially when safe debt returns and typical stock dividend yields are less than 3 percent. Yet they may be overlooking a potentially dangerous flaw in the vehicles' structure. They sink or swim on the availability of funds in the repurchase, or repo, market where they pledge securities in return for short-term loans.

Annaly Capital Management and American Capital Agency are the two largest mortgage REITs by market value and assets. They alone had tapped the repo market for $162 billion at the end of the first quarter, more than three times the amount they were borrowing at the end of 2008. Because short-term funds by definition can dry up quickly, this is a precarious position. During the height of last year's political debt-ceiling impasse - scarcely a real financial crisis - the two companies' shares nose-dived on fears their repo lifeline would dry up.

The attraction, of course, is that when markets are functioning the REITs churn out easy money. They can earn 2 percent on their assets just by investing in longer-dated government-guaranteed mortgage bonds that yield over 3 percent while borrowing short-term at around 1 percent. Borrowing typically eight times their equity means they can deliver dividend yields north of 15 percent. As well as pleasing investors, REITs are lucrative for their bosses, whose pay may be tied to book value. Michael Farrell, the chief executive of Annaly, pulled down $35 million in 2011.

However, borrowing short to invest in longer-term securities - known as a carry trade - has a history of being upended unexpectedly when the Fed lifts interest rates. Not only does the cost of funding go up, but the value of the REITs' mortgage portfolios goes down, assuming both short and long-term rates rise. If that happened, it could damage their credit and force them to put up more securities as collateral. Both Annaly and AGNC have extensive hedging programs to protect against higher rates, but if they squeeze out all the risk they also severely crimp their ability to make money.

And a mortgage REIT funding jam would be messy. The demise of Carlyle Group's listed mortgage fund, Carlyle Capital, in 2008 is instructive. Margin calls on its repo borrowings cratered the fund that invested in up to $22 billion of seemingly safe mortgage bonds backed by government-sponsored enterprises Fannie and Freddie. Carlyle Capital had to dump its holdings, exacerbating shockwaves already shaking the mortgage and credit markets at the time. The fact that Carlyle was leveraged more than 30-to-one worsened the problem.

Annaly and AGNC have four times the assets or more but use much less aggressive leverage, making them less vulnerable. Farrell and his team at Annaly, which was founded in 1997, navigated the financial crisis despite being exposed to the mortgage market at the center of the meltdown. And although his firm aims for eight to 12 times leverage, at the end of both last year and the first quarter the ratio was significantly lower. Fast-growing AGNC, meanwhile, managed to go public as the crisis gained steam in early 2008, and its leverage has been running about eight times of late.

Moreover, markets in general aren't as fragile now as when Carlyle Capital ran into trouble. Even so, mortgage REITs represent the kind of potential trouble-spot that watchdogs like Fed Governor Daniel Tarullo are talking about when they highlight concerns about shadow banking - the world of relatively lightly regulated non-bank financial firms that undertake bank-like activities. As with banks, regulators might think about limiting leverage, reducing the mismatch between borrowing and investing timeframes, or requiring more diverse sources of funding. Otherwise - especially with interest rates so enticingly low - they risk fueling future conflagrations.

CONTEXT NEWS

- Annaly Capital Management on May 2 reported net income of $529.3 million for the first quarter of 2012. At quarter-end its dividend yield was 13.9 percent. At quarter-end it owned $110.2 billion of agency mortgage-backed securities, with $91.7 billion of repurchase agreements outstanding, against stockholders' equity of $15.9 billion. Annaly was founded in 1997.

- American Capital Agency on May 2 reported net income of $641 million for the first quarter of 2012. At quarter-end it owned $80.6 billion of agency mortgage-backed securities, and had $69.8 billion of repurchase agreements outstanding, against stockholders' equity of $8.7 billion. AGNC was founded in 2008."

- Federal Reserve Governor Daniel Tarullo's speech:
  http://link.reuters.com/num97s

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05-06-12 Video - Correction coming or over? We analyze it for you. Sunday PS: After French and Greek votes SPX Futures gapped down..1340, then 1300 possible Monday afternoon: shorty covered, scrum around trendline support shown in video....stay tuned!!

$UYG squeeze charted. ready to rumble? Up, or down. $$

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04-29-12 Correction Over? Call Ghostbusters? Nah, $UYG!! [$BAC $SPY $SPX]

$SPX squeeze, scrum line, bulls winning? maybe, chart: $SPY

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$SPX scrum line, 14ma charted. We regain as support, bada bing. Contaire tru as well.

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This chart shows why this is not a Tech bubble:

Tech PEs are very, very modest today. They were very high, even infinity in 1999, much higher than the SPX chart demonstrate s... this market can go MUCH higher, led by tech. But not straight up, of course. And PEG ratios are also very modest, lots of 20% growers with PEs of 20. We have a boatload on our Focus Worksheets on the Member site.

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04-01-12 Member & Guest Video Analysis and Sector Spotlight on Financials, $UYG $BAC $XLF $GS $USB $C $WFC $VIX