Forget The Dips, Sell The Rips – David Stockman’s Contra Corner 08-24-15

Salient to Investors:

David Stockman writes:

  • The S&P 500 has sliced through both the 50-day and 200-day moving averages. 2130 on the S&P 500 will prove to be a generational high.  CAT, China, European luxury brands, the NASDAQ Biotech Index are shorts.
  • Expect the Fed to announce they are well short of the their magic 2% on the PCE deflator and so defer a September rate increase: not because there is too little inflation but because it is scared about the stock market fall. This will catalyze a frenzy of dip buying, claims the market has bounced off support is ready to resume the bull market. Do not buy the dip.
  • In the past 15 years CPI has risen by 2.5% annually if you include housing and rent inflation. The Fed hurts savers and retirees in order to keep Wall Street gamblers in free carry trade money, hoping to generate economic growth by giving the 1%  wealth effect windfalls.
  • The Wilshire 5000 has gained more than $15 trillion of market cap during the last 6 years, while the total value of all corporate equity in the US economy has risen by more than $20 trillion – substantially passing the two earlier stock market bubbles – despite having virtually nothing to do with the long-term trends in the US economy, weak at best.
  • Zero interest rates can do nothing about global deflation caused by massive malinvestment generated by years of zero interest rates and central bank financial repression. The central banks have created a monumental falsification of prices in virtually every asset class, while divorcing the financial market from the real economy.
  • The post-2009 recovery is the final and radical expansion of the growth and capital spending bubble underway around the world since the early 1990s. Since 2013, the massive capital spending bubble driven by central bank policy has begun to roll-over. The cliff-diving phase of commodity and industrial prices and profit margins has only just begun, and worldwide capital spending will be plunging sharply for years to come. Chinese and Korean shipyards will soon be bankrupt, Australia and Brazil are heading for depression.

Read the full article at http://davidstockmanscontracorner.com/forget-the-dips-sell-the-rips/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+AM+Tuesday

Click here to receive free and immediate email alerts of the latest forecasts.

Dividend Stocks Could Be Dangerous in 2015, Ketterer Says – Bloomberg 12-31-15

Salient to Investors:

Sarah Ketterer at at Causeway Capital Mgmt said:

  • Buying energy stocks very incrementally as oil prices eventually reach a floor and rise again but no idea when. Looks for companies with tremendous financial strength that can continue to pay dividends. Smart companies will use  their balance sheet strength to buy distressed company assets.
  • Do not be passive and just buy the S&P 500 or a world index in an ETF because markets are fully priced and the largest weighted stocks are the most fully priced.
  • Active management fees pay to identify stocks left behind and avoid those that won’t blow up the portfolio.
  • Owns some Russian stocks but not aggressively. If crude oil stays at current prices or slightly higher, there will be further economic strains in Russia over the next several quarters.
  • Underweight US-listed stocks in global funds at 45 percent versus the almost 60 percent benchmark. Some of the best-managed oil and gas companies are US-domiciled.
  • Outside the US there are few tech stocks and no managed care. Some of the best opportunities in financials are abroad.
  • Consumer staples, utilities and health care globally are overpriced so it will be hard for them to meet expectations.
  • Likes industrial stocks in Europe that have fallen because of concerns about growth in China and Europe because they will end up outlasting their competitors, taking market share and becoming even more efficient. If businesses are doing their job and constantly evolving they can succeed even in a stagnant environment.
  • Investors worst mistake is short-term thinking, by selling at just the wrong time.

Read the full article at http://www.bloomberg.com/news/2014-12-31/dividend-stocks-could-be-dangerous-in-2015-ketterer-says.html

Click here to receive free and immediate email alerts of the latest forecasts.

Aberdeen Asset Sells Health-Care to Buy Industrial Stocks – Bloomberg 09-09-14

Salient to Investors:

Martin Connaghan at Aberdeen Asset Mgmt said:

  • Buying industrial stocks with stable revenue and selling health-care stocks as uncertainty about the global economy has caused cyclicals to lag pharma and other defensive stocks by a margin that is too wide to ignore. The outlook for cyclical stocks won’t necessarily change in the immediate future, but there is a lot of bad news and low expectations.
  • Some industrials such as elevator and escalator makers have stable income from contracts that make them less sensitive to global growth.
  • Some industrials are not as cyclical as they appear at first glance if you look at their revenues, because there is always a base level of income and revenues coming from areas that are more stable, regardless of the economic environment.

Worldwide industrial shares are trading near the lowest valuation relative to health-care stocks in more than a decade.

The MSCI World Industrials Index trades at 18 x earnings versus 22 x for the global health-care index, the widest margin since October 2002.

US ETFs tracking health-care have attracted $4.3 billion in 2014 versus $530 million for industrial ETFs.

Read the full article at http://www.bloomberg.com/news/2014-09-09/aberdeen-asset-sells-health-care-to-buy-industrial-stocks.html

Click here  to receive free and immediate email alerts of the latest forecasts.

U.S. Rate Rise Sends High-Dividend Stocks Lower: EcoPulse – Bloomberg 12-12-13

Salient to Investors:

Brad Kinkelaar at Pimco said:

  • The underperformance of many high-dividend stocks in the past 8 months shows a sentiment shift already is under way. If rates continue to rise through 2014, albeit gradually, telecom, utility and REITs should continue to underperform the market.
  • Look for stocks with attractive dividends, particularly that will benefit from global growth – half the companies in his funds are based outside the US.
  • Avoid the most expensive parts of the domestic market, including shares hardest hit by the increase in interest rates, like toll-road companies in China, Brazil and Italy and US retailers.
  • Money managers with dividend-paying strategies flocked into a scarce menu of attractive-yielding stocks in the US, causing their share prices to increase significantly, but the reverse is now happening.

34 percent of economists expect tapering in December. The median economist predicts the 10-yr T-yield will rise to 3.37 percent by the end of 2014.

Benjamin Brodsky at BlackRock said tapering is inevitable and very likely in 2014 so the key T-yield could rise to a fair value of 3.7 percent by the end of 2014, significantly surprise the market, and add volatility not only in Treasuries but to other asset classes. Brodsky said the Fed will be losing one of its essential tools to control the long end of the market amid signs the recovery is strengthening.

Rob Morgan at Fulcrum Securities said large-cap dividend-paying stocks will be hurt as yields on 10-yr Treasuries continue their rise since May, though swapping equities for fixed-income securities is not imminent.

Jim Stellakis at Technical Alpha said investors have become more aggressive about pulling money out of the dividend index, which is in a general downtrend relative to the S&P 500 total-return index, with lower peaks and troughs indicating people are becoming more impatient and selling sooner. Stellakis said the dividend index falling below the March 2012 trough will indicate further deterioration in investor sentiment.

Eric Teal at First Citizens BancShares said we are in a transition period as equity investors adjust to a rising-rate environment, and as the US economy moves into later stages of the expansion that began in June 2009, investors need to be more selective about the type of dividend-paying stocks they purchase, and differentiate between companies with high-dividend yields relative to the market and those whose payouts may be poised to increase. Teal seeks stocks with growing dividends that are leveraged to an economic recovery, especially on a global basis, like the industrials, which have expanded payouts in recent years. Teal said Treasuries approaching 4 percent will be a trigger for asset-allocation models.

James Bullard of the FRB St. Louis said any tapering should be modest to account for low inflation, and should inflation not return toward target, the Fed could pause tapering at subsequent meetings.

Read the full article at http://www.bloomberg.com/news/2013-12-13/u-s-rate-rise-sends-high-dividend-stocks-lower-ecopulse.html

Click here to receive free and immediate email alerts of the latest forecasts.

Goldman Sees S&P 500 Falling 10% Next Year Before Rally to 1,900 – Bloomberg 11-26-13

Salient to Investors:

David Kostin at Goldman Sachs said:

  • The S&P 500 will fall 10 percent in the next 12 months before rebounding to end 2014 at 1,900, end 2015 at 2,100 and end 2016 at 2,200.
  • The overall market should rise because the US economy will be getting better.
  • Buy tech, industrial and consumer discretionary companies as they will benefit the most from an improving economy.
  • Buy shares of companies that are increasing capital spending or repurchasing stock, and companies with above-average operating leverage.

S&P said the 25 months since the S&P 500’s last 10 percent drop is the longest stretch without such a decline since 2007.

Economists expect US economic growth to rise to 2.6 percent in 2014 and 3 percent in 2015 versus 1.7 percent expansion in 2013.

Read the full article at http://www.bloomberg.com/news/2013-11-26/goldman-sees-s-p-500-falling-10-next-year-before-rally-to-1-900.html

Click here to receive free and immediate email alerts of the latest forecasts.

Americans With Best Credit in Decades Drive U.S. Economy – Bloomberg 08-05-13

Salient to Investors:

Joseph Carson at AllianceBernstein said:

  • Household finances are in the best shape in decades, and the US is entering a new, stronger growth phase as healthier finances revive borrowing, spur consumer spending, generate business investment and jobs.
  • Household wealth measured by net worth rose to $70.3 trillion in Q1, up almost $20 trillion from its recession low.
  • The two-quarter average for the financial-obligations ratio was 15.2 percent in March, matching the lowest since at least 1980.
  • Household liquid assets rose by $10 trillion in the past 4 years, and the ratio of coverage for liabilities is 2.43, the highest since 2000.
  • Credit demand and supply have been slow to recover because the housing rebound was delayed, unlike after most recessions, but home sales are rising, foreclosures have waned and banks are more willing to lend against an asset that’s gaining value.

    The rebound in housing and employment needs to be sustained for credit to pick up.

  • All the easy monetary conditions won’t work if the consumer does not take advantage of credit and banks are not willing to lend.

James Paulsen at Wells Capital Mgmt said:

  • The credit-driven cycle is good for investors and could help the S&P 500 to double-digit gains in 2014 after an advance of as much as 20 percent in 2013.
  • Financials like banks will continue to outperform as they are at the heart of the credit-creation process, which is becoming noticeable.
  • Industrial, materials and tech stocks are attractive.
  • Consumer cyclicals have less room to rise after outsized increases, but if unemployment falls close to 6 percent, expect a lot more demand for credit and spending.
  • The improvement in borrowing and lending is not yet strong enough to get front-page coverage

  • We won’t get another bubble economy or Gekko environment.

Keith Leggett at  the American Bankers Association said bank-card delinquencies in Q1 were the lowest since June 1990, and said we are on the cusp of a trend toward more risk-taking, with consumers becoming a bigger contributor to economic growth.

Michelle Meyer at Bank of America said property prices may jump 11.8 percent in 2013 after climbing 7.3 percent in 2012, and mortgage debt as a share of disposable income will continue to fall. Meyer said consumers will provide a bigger lift to consumption over time as the housing recovery helps to heal households’ balance sheets.

Barry Bosworth at Brookings said Americans said the Fed may keep the federal funds rate near zero until 2015.

Read the full article at http://www.bloomberg.com/news/2013-08-05/americans-with-best-credit-in-decades-drive-u-s-economy.html

Click here to receive free and immediate email alerts of the latest forecasts.

Confidence in U.S. Consumer Stocks Seen at UBS: Chart of the Day – Bloomberg 05-28-13

Salient to Investors:

Jonathan Golub at UBS recommends overweighting consumer-discretionary stocks. Golub said consumer strength will have a positive impact on a host of industries, whereas businesses remain hesitant to put cash to work. Golub is neutral on industrial and tech stocks.

The consumer-discretionary index is the top performer among the S&P 500’s 10 broadest industry groups since stocks began climbing in March 2009, and outperforming the S&P 500 in 2013.

The Conference Board said consumers were the most confident in April since February 2008, whereas Chief Executive magazine cited a slump in sentiment among business leaders in a May survey.

Read the full article at http://www.bloomberg.com/news/2013-05-29/confidence-in-u-s-consumer-stocks-seen-at-ubs-chart-of-the-day.html

Click here to receive free and immediate email alerts of the latest forecasts.

Consumer Stocks Challenged Even With Solid U.S. Spending – Bloomberg 01-15-13

Salient to Investors:

James Paulsen at Wells Capital Mgmt said job creation, tame inflation and rising home prices support solid retail spending in 2013, but consumer cyclicals may underperform the market because these positive economic trends are already discounted – the S&P 500 GICS Consumer Discretionary Sector Index has outperformed the broader market by 58 percent since 2008, the longest streak since 1990 but is overextended and trading at a 27 percent premium to the industrials versus a 20-year historical average of 13 percent.

Paulsen said the S&P 500 industrials offer better values, boosted by re-accelerating emerging-world economies. Paulsen said consumer discretionary stocks started outperforming the market in 2008, before retail spending began improving and prior to the stock market bottom in March 2009, a sign of the disconnect between Wall Street investing and Main Street activity.

Quincy Krosby at Prudential Financial said industrial companies have been beaten down amid debt concerns about Europe spreading and about slowing growth in China, but these economies appear to be stabilizing. Krosby said money managers can’t wait until everything is perfect to beat the market, and will focus on large-caps with international exposure like Caterpillar because they are a good barometer of the industry. Krosby said sector outperformance is born in the worst of times and dies in the best of times.

Eric Teal at First Citizens BancShares said investors will start rotating out of consumer discretionary stocks before any negative earnings results, and the fiscal deal may be a drag on the industry. Teal said the fiscal cliff is much more broad-based and can impact consumer spending at all different levels. Teal said industrials still need to demonstrate better earnings growth to merit an above market weighting.

Read the full article at http://www.bloomberg.com/news/2013-01-16/consumer-stocks-challenged-even-with-solid-u-s-spending.html.

Free email alerts of articles as soon as they are posted.

Stock Inflows Beat Bonds First Time in 10 Weeks, Citigroup Says – Bloomberg 11-29-12

Salient to Investors:

Markus Rosgen and Yue Hin Pong at Citigroup said EPFR Global reported stock funds this week had their second-largest weekly inflows in 2012 and more than the inflows into bond funds, while US funds reversed an outflow trend and Asia attracted the second-largest inflows this year.

Pong said most economic data have positively surprised, and more people are starting to believe the US fiscal cliff may turn out to be ok. Pong said it would take more time for equities to gain full speed against bonds given lingering issues in Europe and weak global trade.

Global investors say the world economy is in its best shape in 18 months

Strategists at three of the world’s biggest banks are advising investors to buy Asian equities most tied to economic growth after valuations fell and the global economy showed signs of recovery.

Niall MacLeod at UBS  predicts technology, industrial and materials stocks will climb in 2013 as China’s expansion accelerates and fiscal-cliff concerns fade. Jonathan Garner at Morgan Stanley said valuations for cyclical shares are 40 percent lower than defensive equities, including household-products makers. Rosgen said an improving earnings outlook will help lure investors.

Read the full article at http://www.bloomberg.com/news/2012-11-30/stock-inflows-beat-bonds-first-time-in-10-weeks-citigroup-says.html

 

 

Best Performing Russell 3,000 Stocks And Sectors In 2012 – Seeking Alpha 09-24-12

Salient to Investors:

Smaller stocks are outperforming larger stocks in 2012.

Top sector is healthcare, followed by consumer discretionary, telecom and financials.

Bottom is utilities, followed by energy, industrials, technology, consumer staples and materials.

Read the full article at http://seekingalpha.com/article/884011-best-performing-russell-3-000-stocks-and-sectors-in-2012?source=intbrokers_regular