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Treasuries are off to their worst start in nine years amid signs the U.S. economy is strengthening and Europe is moving closer to resolving its sovereign-debt crisis.
Yields on benchmark 10-year notes climbed 16 basis points, or 0.16 percentage point, the biggest weekly increase since the five days ended Dec. 23, as reports showed fewer Americans than forecast filed for unemployment benefits and home sales rose for a third month in December. The refuge appeal of Treasuries eased as Greek officials held debt-swap talks and European bond sales saw increased demand. Policy makers are expected by analysts to say they’ll keep borrowing rates low as the economy gathers momentum when Federal Open Market Committee meets Jan. 24-25.
“The better sentiment out of Europe and the improving domestic economy is weighing on Treasuries,” said Kevin Flanagan, a Purchase, New York-based fixed-income strategist for Morgan Stanley Smith Barney. “Still, there is a lot of uncertainty, and despite the positive signs in the economy we are still at very low rates because there is so much that is unresolved.”
U.S. government securities have lost 0.342 percent this year, the most since a 0.693 percent loss in 2003, according to Bank of America Merrill Lynch Indexes. The benchmark 10-year yieldrose five basis points to 2.02 percent yesterday in New York, according to Bloomberg Bond Trader prices.
Treasuries finished 2003 returning 2.25 percent after the weak start and have posted annual gains every year but one since 2009, when they fell 3.7 percent. U.S. corporate bonds returned 0.5 percent this year and German bunds fell 0.1 percent, the indexes show.
Widening Spread
Initial jobless claims plunged to 352,000 in the week ended Jan. 14, the lowest level since April 2008, the Labor Department said on Jan. 19. A Federal Reserve report on Jan. 18 showed factory output increased.
The difference between two- and 10-year yields widened four basis points to 1.78 percentage points after touching 1.79 percentage points, the most since Dec. 13. The spread was as narrow as 1.47 percentage points on Oct. 4.
“The lack of blowups in European sovereign debt have allowed calm to erupt, and that has weighed on Treasuries,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, which oversees $12 billion in fixed income assets. “Home sales are improving, though from very poor levels, which underlies the improving data we’ve had of late,”
The Citi Macro Risk Index dropped to a five-month low of 0.601 on Jan. 19, showing increased demand for higher-yielding assets.
33 comments:
Queenbee, I will take you up on your invite and write a guest-post about buying Junk Silver from private indivisuals.
In fact - today we took a trip across Puget Sound to pick up a few cool old coins. But I must admit part of the reason was just to get out of the house, after being cooped-up all week thanks to a heavy snowstorm.
One of these coins is an 1854-0 Seated Liberty half dollar. This is the oldest coin that I have picked up on my silver-hunting forays!
The weather is good today, so let me get out and make some pictures now.
Mammoth thank you. Take as much time as you need. Wow 1854 think of how much time and change has gone by since the day that was minted. About 160 years. My Dad has some 1898 era silver dollars that I really should find out what they are worth. One day I went through all his coins and separated the silver from the sandwiches for him.
GAW
Replied on previous thread.
Out of curiiosity, I ran a scan of stocks with good fundamentals that have not participated in the rally but have shown some recent strength:
http://finviz.com/screener.ashx?v=111&f=cap_smallover,fa_eps5years_pos,fa_epsqoq_pos,fa_netmargin_o10,fa_peg_u2,fa_quickratio_o1,fa_sales5years_pos,fa_salesqoq_pos,ta_sma20_pa,ta_sma200_pb,ta_sma50_pb&ft=2
of the 9 stocks which this scan threw up, 2 are gold miners which is a very high percentage. In addition, when I checked the IBD rating on Investors com, the list was reduced to 7 stocks since FSLR and HMIN are not top-rated. So that's now 2 out of 7 that are gold miners, and 4 out of 7 that are in the basic materials sector.
I haven't checked the charts, but there may be things worth looking at there qhwn we've had an overall market correction.
My friend is an antique dealer, he has some Roman coins and even one that is more ancient, it is said to be from Babylon, though it is hard to tell, it is very worn.
But you do get a feeling of the long sweep of history when you look at them, though you can't touch them, they have to be protected from handling with bare hands.
He has some ancient statues too, small ones, very worn, but they give you the same feeling.
Probably the same feeling you'd get from looking at that 3,500 year old tree (till some complete idiot destroyed it) or an ancient redwood tree in California.
A farm not far from me has a stump still on their front lawn from when this area was originally logged in the mid 1800s. This stump is about 12' in diameter, an oak or maple tree that must have been a few hundred feet tall, and probably 500 years old or more at a guess.
mugabe - things do look overbought short term, but after a correction the market could go up for a while yet, based on the medium term chart
We are at a decision point here, the previous high of 1350ish has to be passed now in an upwards direction, or the uptrend we have seen of late is just a rally within a larger downtrend.
The big H & S pattern is still in place, needs the price to get above 1370ish and stay there for a few weeks at least, or we are still in the declining right shoulder off the previous big high.
Obviously the time to buy was last October, what did your system show at that time?
What do you think of the Fearless/Cara style long term swing trade strategy? I think it is probably the best thing for the long term part of a stock portfolio: buy solid blue chips that pay a dividend, sell covered calls, collect dividends (preferably on a DRIP plan) and sit back, you would only buy or sell near long term turning points - should be able to achieve +8% to +10% gain in most years, even when the market is flat, and when the big rallies do happen, much more..
That Mauldin analysis I linked to in the previous post at Big Picture is probably the best one he has ever done, as it clearly lays out the rather poor alternatives for Europe and how things will likely work out.
It's not Bullish, but is very fact based, no gloss or spin there. So hold your nose and read it, as it does explain many details better than almost any other analysis I have read on those issues.
Perhaps the most interesting 'treasures' are those within our own families. 'Stuff' handed down is fascinating to me. They provide a sense of history. Sadly, in our youth we forget to WRITE THINGS DOWN. I mean how many of us have pictures with people we don't know who they are in them?? WRITE IT ON THE BACK (or bottom). Family stories are treasures that carry on traditions and history and can only be kept alive if YOU hand them on.
As for buying coins, I used a reputable dealer who buys and sells. I was happy with the service and the over spot charge (I am in no way unhappy with someone making a FAIR profit.) It was a small shop. There is also a shop about 20 minutes from me that sells coins among other things. The owner is personable, willing to look at stuff you bring in and give you an idea of value (without charge) and makes no effort to 'sell' you ideas or coins. He does, however, give advice like NEVER CLEAN/POLISH OLD COINS!! I bought my silver dollars from him last year and when I told him what I was buying for he advised me to go with uncirculated US mint rather than proof to save a bit of money (these were gifts).
A small thing, maybe, but showed 'character.'
I LOVE that word. It TELLS so much...and it is hugely missing today...in life, movies, books. Think of a story/movie/person who influences you. Nine times out of ten they have 'character'.
Yesterday, I cooked up a storm. Made chicken stock and homemade chicken soup off bones; homemade cinnamon rolls as it snowed. Went through ads to make my weekly shopping list, etc. Not going out until the ice melts or until tomorrow when I have to. After 5 broken arms I have certified myself as Queen Klutz! I FREEZE when I fall. NOT GOOD. Today is a lazy day as I try to prepare myself for tomorrow's task of accompanying hubby to VA neurologist. I will surround myself with music and gentle reading to force meditation and focus.
http://news.discovery.com/tech/wind-power-without-the-blades.html
Cool idea there.
The next Season in the Kondratiev Wave is Spring, which is an era of economic expansion based on technological advancement, and these are the types of ideas that will drive that.
Innovation, new ways of doing old things, and old ideas updated, are the foundation of economic growth in a real economy. Not the FIRE paper shuffling service based non-productive sectors, which will shrink back to historical proportion of the economy much smaller than during the first decade of this century.
Yes, I have boxes of old photos, that are not labelled. And it is too late now, no one left alive who would recognize the faces in the photos.
I have an old panoramic black and white picture from a family picnic, around the 1880s, a gathering of over 100 people of all ages. But I don't know who any of them are, though I assume from the careful way it was wrapped and stored with other family photos they are my ancestors.
I wish whomever took the picture could have attached a paper with the names.
Mammoth - how heavy was that snow? Must have been big if you were at home all week.
It snowed about a foot here the other day, and no one even mentioned it at work, no one was late, and no one left early. Just another day.
We had a blizzard here last December, I got 5 feet of snow, and it caused a 1 day shutdown of most everything, the next day everyone was back to work. But that was the biggest snowfall we have had in years, probably won't be seen again soon.
I see the daylight is getting longer, and you can feel the sun getting warmer... winter is on the way out now, about 6 more weeks and early Spring will be in the air here - that's the optimists view.
Gee guys I so miss the snow. NOT! It is a lovely 75F today and sunny. surprisingly very little rain for winter if you can call this winter. I look forward to the Mauldin piece. With Yvonne getting better I feel like investing again. John Hathaway was on KWN and it is pretty much the same old same old talking his book.
I don't think anyone really knows why the PM miners stay so oversold and making no moves. My opinion is very few offer dividends. At least Tocqueville has that in December and I think it is 2%. I am sure the executives are all overpaid as well and get great bonuses at the end of the year.
http://peterlbrandt.com/a-more-in-depth-look-at-the-stock-indexes-how-bullish-is-bullish/
He shares the Bullish view there, though he is waiting for final technical confirmation of the uptrends.
Also mentions QEx as the driver of the last Bull trend, and says that won't be present this time, but the ECB's LTRO is a substitute for it. I'm not sure there, I doubt EUro area Banksters are going to buy the US markets en masse, given their problems closer to home.
Certainly the fundamentals don't support a long term BUll at this time for US markets, though for the next year it could happen. But the 30 year era of deficit spending in Washington is ending, in a year+, after the election, the US will have to get serious about Budget cuts, or go the way of Greece, quickly - the Bond market will put an end to it by demanding higher interest rates - and that implies massive GDP shrinkage for the USA for a few years to get the economy back in balance. Or massive and total collapse will be the only other alternative. Austerity is something you do because you are forced to, and not before, and that day is coming soon - failure to rein in spending in previous years has made the problem so acute it will not be ignored much longer, as it can't be.
So the 5-8 year economic outlook for the US is rather grim, IMHO, and no political promises can change that, and will probably make it worse, as usual. Obama or Gingrich or Romney, all are clueless fools.
GAW says:
mugabe - things do look overbought short term, but after a correction the market could go up for a while yet, based on the medium term chart
We are at a decision point here, the previous high of 1350ish has to be passed now in an upwards direction, or the uptrend we have seen of late is just a rally within a larger downtrend.
The big H & S pattern is still in place, needs the price to get above 1370ish and stay there for a few weeks at least, or we are still in the declining right shoulder off the previous big high.
Mugabe says:
We've actually broken the neckline of the big H and S pattern, at least on the semi-log chart.I agree that we need to break the previous high but RSI and especially weekly MACD look very positive. Weekly MACD does not look at all like it's ready to roll over. And breadth is v good. As you know, if you wait till the previous high is broken you lose a lot of the rally.
The gold miners are saying one of two things, IMHO:
The price of the miners remains low because long term the price of gold/silver are not sustainable at present levels, and lower prices are expected over time
OR
The miners are simply lagging behind, and will play catch up eventually. But as you said, why bid up miners when they will pay you no more than the pitiful dividend they give now. Considering the price of the metals, the dividends should be much higher, and rising.
I would consider the miners as merely another form of a long term call option on the metals themselves, and so you would probably be better off buying the actual option (lower cost) or the metals themselves.
The gain should be substantial, if they ever do rise to meet the metals prices, but given their poor performance since '08, that is a big IF to get over. There is a contrarian argument in favor of buying the miners, but that has been present for a few years, and not gone anywhere - so I tend to discount that.
GAW says;
Obviously the time to buy was last October, what did your system show at that time?
Mugabe says:
I'm not sure what you mean by system. Looking at weekly RSI amd breadth, there wasw positive divergence, and weekly MACG showed the same a bit later:
http://stockcharts.com/h-sc/ui?s=SPY&p=W&yr=1&mn=0&dy=0&id=p43604777002
The ahort-term sustem I'm trialling is agnostic as far as major tops and bottoms are concerned, it just plays sghort-term momentum.
The neck line on a H & S pattern does not mean that much long term, either the previous high is broken, on a new uptrend, or the previous down trend remains, and the present rally is just a rest stop on the continuing way down.
If you look at the very long term chart of the S&P 500, things are not very Bullish, and fully in line with Kondratiev Wave theory:
http://advisorperspectives.com/dshort/guest/Peter-Williams-120117-Dow-Historical-Perspective-Update.php
http://advisorperspectives.com/dshort/guest/Peter-Williams-120108-Dow-Historical-Perspective.php
http://advisorperspectives.com/dshort//guest/John-Carlucci-120110-The-Great-Repression-Update.php
"one could make a reasonable statistical assumption that the slope for the current secular bear market beginning in 2000 would also follow the same 34 degree angle as the previous three bears. Overlaying that slope on the 2000 bull top would suggest that we are not yet half way through the present bear cycle...
If we follow the 34 degree bear slope line to the -50% green variance line, we arrive at a very conservative end point for the current bear in 2022 - 2023 with the S&P at approximately 540. That, I wish to emphasize, is the conservative scenario.
A more mathematically realistic scenario is illustrated in Figure 4. Here, a blue variance line has been added at the -65% level, below the green -50% line. This would take the end of the secular bear out to 2025 - 2026 at S&P 450."
Much more at the above links
I meant would your system have given a 'buy' signal around that time, as looking back (hindsight is always 20/20, isn't it!), that was the time to enter the SPoos for a swing trade.
Not expecting to time the turn to the point of course, but a trading system worth it's salt should have thrown out a 'buy' somehwere there in Oct or at least Nov, don't you think?
GAW says:
What do you think of the Fearless/Cara style long term swing trade strategy? I think it is probably the best thing for the long term part of a stock portfolio: buy solid blue chips that pay a dividend, sell covered calls, collect dividends (preferably on a DRIP plan) and sit back, you would only buy or sell near long term turning points - should be able to achieve +8% to +10% gain in most years, even when the market is flat, and when the big rallies do happen, much more..
Mugabe says:
I think if you buy when weekly RSI on SPY is oversold or very near oversold -doesn't happen often, once every year or two, and there's positive indicator divergence, and you then sell when weekly RSI get to overbought, you'd definitely make money. You could be out of the market for aq long time (a year plus waiting for it to go from overbought to oversold on the weeklies) but that wiouldn't be a problem.
Re the ocvered calls, I think it's an interesting idea but you'd have to be damn sure that they were sufficiently out of the market, as ifd they got ghit you'd lose your lnog term position. I dodn't knoe if its worth the risk. Do you know how much % return fearless makes a month on covered caalls?
re buying when the RSI weekly gets overt bought and indicators showe pòsitive divergence, you could easily have a month of 2 of gut-wrenching losses beforee the market finally bottoms, so you'd need to be psychologically prepared for that and trust your system,
Stretching the K-Wave Winter out to 2022-2026 would indeed be a worst case scenario, but it would be logical, given we are still bursting the largest credit bubble in history.
That length of a Depression would be caused by politicians, who of course will do anything they can to postpone the inevitable by kicking the can until no more kicks are possible. I give you EUrope now as the poster child, and Japan and US as next up to bat.
The same old story: politicians unable to grapple with reality make the problems much worse and longer lasting by their inept and totally wrong policy responses.
So there is a lot of historical credence to the gloomy case stated above on dshort. Unless you think Washington is going to get it's act together and start acting like a real Government concerned with the long term well being of the country they so ineptly govern - the odds of that are slim to none, and slim left town, IMHO.
The Kondratiev Wave rolls on, crushing all before it, just like the fools on the beach befoer the tsunami arrives, still gathering sea shells despite the warnings. It is the force of history turning, and it will not be denied.
I'm not sure if you could call it a system - it's a collection of medium term indicators, I'd probably have gome long near start of October at around 122 on SPY,just in time to catch a nasty loss of almost 7% but medium term a good time to go in.
YOu0're never going to time the bottom exactly, but you can stand a fair chance of entering the market at a point when, medium-term, you'll make money.
I don't subsribe to Evil now, so I can't read all of Fearless posts, just the intros for most, but he has described his system several times, and that is the gist of it.
Bill Cara plays it the same way, and both only sell well OTM covered calls, at levels that if the shares are indeed called away a healthy profit would be locked in.
Exact % gain from the calls would be hard to figure in advance, as the options prices can move a lot from month to monht. But the way to max the income would be to sell front month calls every month in the week after OpEx, well OTM, at the select price point where you get the most premium, but are not taking overly much risk of having the shares called away - it's an art rather than a science, as Fearless says.
Of course there is some risk, but it is a way to maximize your annual returns in a rather safe manner. Who cares if the shares are called away at 33% or 50% profit, take the money and run, at that point I would not be too concerned, would you?
Nothing is perfect, sure you might miss out on some of the rally after, but it would have to be one of the biggest rallies in history to really cause you to pine for the "lost profit". Experienced traders should not be considering that, any win is a good win, IMHO.
Long-term, could argue that we've been in a big trading tange simce the high of 2000
http://finance.yahoo.com/echarts?s=SPY+Interactive#chart6:symbol=spy;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
The next high could continue that trading range (around 1500 on SPY) and then we could revisit the lows again. The good news is that you don't need to know the answers to any of that to trade effectively medium-term.
From an EW perpsective, you cfould omimuosly argue that we're in wave 5 now, which would mean there's something nasty not very far off.
GAW says;
Of course there is some risk, but it is a way to maximize your annual returns in a rather safe manner. Who cares if the shares are called away at 33% or 50% profit, take the money and run, at that point I would not be too concerned, would you?
Mugabe says;
That's a fair point. Another potential problem I've thought of is that you'be got to buy in 100 lots. That would rule out any stock above 50 or 60 for me,
I think I'd give Evil a look if I didn't work at all. i knoew some people there have a full-time job and subscribe, but there seems to be a lot of short-term currency stuff there, people talkinging about taking a few pips outt of aud/yen, that sort of thing.
I also think the first month I might not trade and just try to get a feel for hid zero lite oscillator, which a lot of the plays seems to rely on.
Re the goldminers, I'd agree that there's abosolutely nothing to like on the gold stocks chart or the indicators AT ALL. The only thing in their favour is that they're cheap compared to gold
MY favorite quote from the maudlin article
So our problem country goes to its lenders and says, "We think you should share our pain. We are only going to pay you back 50% of what we owe you, and you must let us pay a 4% interest rate and pay you over a longer period. We think we can do that. Oh, and give us some more money in the meantime. And if you refuse, we won't pay you anything and you will all have a banking crisis. Thanks for everything."
Read more: http://articles.businessinsider.com/2012-01-14/markets/30626783_1_s-p-european-commission-global-growth/5#ixzz1kD5slZhy
MAULDIN: Is This The End Of Europe?
Found this over at Jesse's Cafe
Corzine Sued for RICO Violation by MF Global Customers
very good piece from Mark on the market's direction:
http://marketmontage.com/2012/01/21/on-playing-probabilities/
there was an excellent opinion article in the Telegraph today by Liam Hallligan that captures my mindset of what is happening.."In the end, this eurozone crisis is less about Greek pensions or Italian welfare payments than it is about the region's Gordian knot of entwined bank and sovereign debt. The banks are destroying the governments. And once the governments go down, social unrest will ensue. Eurozone banks need to be forced to fess-up, write down their losses and consolidate, yet lawmakers hesitate. That's because our political classes have been "captured" by the financial services sector, a sector allowed to run riot, in recent years, to an ever greater degree.
"Power tends to corrupt", as Lord Acton famously said, "and absolute power corrupts absolutely".
I question WHO you think will be investing in the markets? Not Seniors. Even those of us WITH savings are stretched beyond belief. Not youngsters. They are busy buying tech PRODUCTS. Not middlers. They are raising families OR having kids who can't find jobs move back in.
So who will be INVESTING? And who TRUST bankers or the markets?
yep, with the exeption of greece this is not a case of bad boy public sector, but incredibly reckless behavour by the banks which govts haven't got the balls to tell to take a hike.
For the banks everything was fine until when the bill came due the countries couldn't pay. The took huge bonuses and now that the banks are over leveraged, they want the people to guarantee their own stupidity and greed. Why should they? Please Greece and the rest of Euroland do an Iceland on them. Hit em with your best shot! Banks can be replaced. You cannot.
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