BlackRock Cautious as Sales End Dollar Bond Rally: China Credit – Bloomberg 01-31-13

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Suanjin Tan at BlackRock said the avalanche of new deals has investors fatigued, and continued home-price restrictions and a slowing economy means being selective. Tan sees a big mindset shift in the past year with fears of a huge property market collapse in China gone: the risks are there but very few people see a catastrophic scenario caused by ghost cities in the near future.

Owen Gallimore at Australia & NZ Banking said that if US Treasuries start offering more decent yields again you are going to really question why you own a Chinese high-yield property bond.

Fitch says residential property sales in China will rise in 2013 driven by improved funding availability to developers.

Read the full article at http://www.bloomberg.com/news/2013-01-31/blackrock-cautious-as-sales-end-dollar-bond-rally-china-credit.html

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China Surplus Labor to Disappear by 2025, IMF Researchers Say – Bloomberg 01-31-13

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Mitali Das and Papa N’Diaye at the IMF said China’s supply of low-cost workers will run out between 2020 and 2025  pushed by a precipitous drop in the working-age population, and necessitating a shift to a more intensive growth model with a greater reliance on improving total factor productivity.

A 2010 paper – “China Has Reached the Lewis Turning Point” – from the International Food Policy Research Institute said dramatic increases in inflation-adjusted wages since 2004 indicate the era of surplus labor is over.

Read the full article at http://www.bloomberg.com/news/2013-01-31/china-surplus-labor-to-disappear-by-2025-imf-researchers-say.html

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Ex-Jefferies Arrest Shows Market Lacking Transparency – Bloomberg 01-31-13

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Investors and regulators say unscrupulous mortgage bond sales tactics are widespread in a market lacking transparency, where even Wall Street’s most sophisticated mortgage investors remain at risk.

Marilyn Cohen at Envision Capital Mgmt said managers who depend on dealers to find securities and quote prices over the phone are often misled – they all do it.

Lawrence Post at Post Advisory Group said corporate bond trades are generally posted on Trace, making deception more difficult.

Joseph Fichera at Saber Partners said in every market with transparency, trading has improved, along with increased investor confidence and market breadth.

Former trader Turney Duff said money managers expect some misdirection from salespeople in all markets.

Read the full article at http://www.bloomberg.com/news/2013-01-31/ex-jefferies-arrest-shows-market-lacking-transparency.html

 

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S&P 500 Off to Best Start Since ’87 as Stocks Lead Gains – Bloomberg 01-31-13

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Paul Zemsky at ING Investment Mgmt sees much momentum for stocks even after such a good start to the year: earnings are strong, world economies are bottoming and valuations are attractive.

EPFR Global report $39 billion moved into equity mutual funds in 2013, more than double the comparable period in 2012. The previous better start was in 1997, when the S&P 500 rose 6.1 percent in January and 31 percent for the year.

The average of 15 strategists surveyed by Bloomberg expects the S&P 500 to end 2013 at 1,543; Citigroup expects 1,615 and Bank of America expects 1,600.

The median economist expects the Dollar Index to climb to 80.7 from 79.2, and the 10-yr Treasury at 2.2 percent by year-end. Traders, investors and analysts expect precious metals to be up as much as 25 percent in 2013, grains up 18 percent and industrial metals up 16 percent.

74 percent of 239 S&P 500 companies so far reporting have beat quarterly estimates. Earnings at financial institutions have risen 62 percent.

John Manley at Wells Fargo Advantage Funds said we didn’t go over the cliff, China is better, Europe seems to be finding its bottom, and corporations doing more with less.

Filip Petersson at SEB said oil has been surprisingly strong, influenced by the high level of risk appetite, which is having a negative effect on gold.

Read the full article at http://www.bloomberg.com/news/2013-01-31/s-p-500-off-to-best-start-since-87-as-stocks-lead-gains.html

 

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Endowment Returns Fail to Keep Pace with College Spending – Bloomberg 01-31-13

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Commonfund and the NACUBO said US university endowments lost on average 0.3 percent in the year ended June 30 after gaining 19.2 percent a year earlier. Over a third of the schools reported receiving less in donations than a year earlier. Harvard’s endowment fell 4.1 percent, Yale’s less than 1 percent.

On average, endowments allocated 16 percent of their portfolios to international equities, increased private equity, cut hedge funds. The annual average return for endowments over 10 years was 6.2 percent.

Verne Sedlacek at Commonfund said universities are failing to generate returns sufficient to cover inflation, fees and transfers from their endowments to pay for operating costs.

Read the full article at http://www.bloomberg.com/news/2013-02-01/endowment-returns-fail-to-keep-pace-with-college-spending.html

 

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Treasuries Trail Stocks by Most in 15 Months Before Jobs – Bloomberg 01-31-13

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Treasuries are trailing stocks by the most since October 2011.

Hiromasa Nakamura at Mizuho Asset Mgmt said the current rise in yields is due to Fed easing, while investors expect money to go into riskier assets, and equity markets are rising.

Bill Gross at Pimco said unprecedented central bank efforts to spur the economy will result in inflation – the end stage of a supernova credit explosion is more inflation than growth.

Read the full article at http://www.bloomberg.com/news/2013-02-01/treasuries-trail-stocks-by-most-in-15-months-before-jobs.html

 

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Morgan Stanley Buys Argentine Stocks as YPF Deal Lures BlackRock – Bloomberg 01-31-13

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Timothy Drinkall at Morgan Stanley were overweight in Argentine stocks at the ed of 2012 after avoiding them earlier in the year. Drinkall said valuations are extremely low after government controls on imports and currency markets weakened Argentina’s economy and President Fernandez’s declining popularity has curtailed her ability to implement some of her negative policies. Drinkall expects the economy to expand between 2 percent to 3 percent in 2013 versus less than 1 percent in 2012, helping boost corporate profits.

Sam Vecht at BlackRock Frontiers Investment Trust increased Argentine stocks to 3.9 percent of total holdings at January 16 after valuations fell so much. Vecht said foreign companies’ increased interest in Argentina’s shale fuel deposits may signal easing concern about the risk of doing business in the country.

Thomas Vester Nielsen at Lloyd George Mgmt said the odds of government meddling in listed companies are still too high to invest in Argentine equities.

Bloomberg reports the cost of credit-default swaps has almost tripled during the past year to the second highest after Greece.

Hans-Henrik Skov at BankInvest New Emerging Markets Equities Fund said Argentina is moving in the wrong direction so doesn’t mind missing out on market rallies.

Read the full article at http://www.bloomberg.com/news/2013-01-31/morgan-stanley-buys-argentine-stocks-as-ypf-deal-lures-blackrock.html

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Equity Funds’ Weekly Inflows Six Times Bonds, Citigroup Says – Bloomberg 01-31-13

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Markus Rosgen and Yue Hin Pong at Citigroup said stock funds attracted $18.8 billion last week versus $3 billion for bonds, with 58 percent of equity inflows going to North American funds. Pong said the outperformance of equities over bonds was mainly driven by US ETFs, while earnings are positive.

74 percent of the 239 S&P 500 companies so far reporting beat estimates.

Read the full article at http://www.bloomberg.com/news/2013-02-01/equity-funds-weekly-inflows-six-times-bonds-citigroup-says.html

 

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R-Word For U.S. Economy in 2013 is Rebound Not Recession – Bloomberg 01-31-13

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Nigel Gault at IHS Global Insight said the drop in GDP in Q4 2012 was driven by temporary corrections in defense spending and inventories and is not a harbinger of recession – expects 2 percent growth in Q1 2013.

Mark Zandi at Moody’s Analytics said the expansion will remain on course thanks to a mounting housing recovery, a steadily improving job market, and reviving demand for US exports. Zandi expects 2.1 percent growth in 2013 as an improving job market and rising home prices help offset higher payroll taxes.

Peter Newland at Barclays said the Q4 report ex inventory and defense data was positive – consumer spending growth picked up to 2.2 percent and business investment accelerated.

David Greenlaw and Ted Wieseman at Morgan Stanley expect 1.5 percent growth for Q1 2013.

Michael Feroli at JPMorgan Chase said the reduced pace of stockpiling means companies won’t have to pull back on production as much in Q1 if consumer spending falls in response to the recent tax increases.

Michelle Meyer and Ethan Harris at Bank of America expect household expenditures to take a hit in Q1 due to the increase in payroll taxes.

Carl Riccadonna at Deutsche Bank Securities says housing may lift growth by as much as 2 percent in 2013.

The World Bank predicts developing nations to grow 5.5 percent in 2013, while Europe stabilizes.

Read the full article at http://www.bloomberg.com/news/2013-01-31/r-word-for-u-s-economy-in-2013-is-rebound-not-recession.html

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Biggest Defense Spending Dive Shows Risk of U.S. Cuts – Bloomberg 01-31-13

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Eric DeMarco at Kratos Defense & Security Solutions said politicians on notice  that if they don’t fix the drop in defense cuts, the country is going back into recession.

Benjamin Mandel at the Bureau of Economic Analysis said on an annualized basis, defense spending for the year fell 3.1 percent from 2011.

Kevin Brancato at Bloomberg Government said the Q4 2012 decline partly reflects a spike in Q3. The Pentagon traditionally spends the most in Q3, the end

Byron Callan at Capital Alpha Partners said monthly and quarterly numbers are volatile – Q4 is an aberration.

Alan Krueger at the White House Council of Economic Advisers said the 22 percent drop in defense outlays is due to uncertainty over the automatic spending cuts.

Read the full article at http://www.bloomberg.com/news/2013-01-31/biggest-defense-spending-dive-since-vietnam-shows-risk-of-cuts.html

 

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