2012/03/07: Courtesy access to ‘Brief Update’ and extended discussion in new format

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Short & Sweet on the specific market comments in this post, because yesterday’s TrendView Brief Update was also actually very brief for a change. That is because the equities key technical indications were very well crystalized for the sharp failure yesterday after such a long churn to the upside. And we are referring you back to yesterday’s analysis because the levels and psychology explored there for the March S&P 500 future remain the same for the critical late week period.

And one of the reasons we did not post to the blog during the highly active market swings yesterday was that we felt the more critical decision will be made in the late part of this week. Yet not necessarily solely upon the market response to the US Employment report. As we noted in the title of Monday’s post, “You better have ‘game’ prior to Friday…” (which was to say prior to Friday’s US Employment influence.)

And why is that? Because of all the factors we have covered previous on the more critical nature of the next phase of the attempt to address the European Sovereign Debt Crisis. That is something we have explored at length in previous analysis. Any of our regular readers should have been ready for the potential market dislocation under the influence of (finally) a more definitive deadline for at least the current attempt to defuse any immediate sharp failure of those European rescue efforts.

Which gets us to the other reason we were not available to add another post to our already extensive observations in that area yesterday morning. In addition to all of our highly active institutional analysis and sharing our background thoughts on the blog, we have resurrected a previous media role that allows for more extensive, open-ended discussion of those factors.

And I am very excited once again about…

2012/01/27: It’s a wrap: Risk Fizzle, Euro-hope, WEF ‘Global Risks 2012′, Smartest Guy in the Room

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Looks like Helicopter Ben morphing into Gusher Ben didn’t help much… except to exacerbate what we all knew was going to be a disjointed week from the time we walked in. And the markets certainly did not disappoint in that regard. Pops and flops (equities and to a lesser degree risk assets like commodities), solid extensions of up trends (those strange bedfellows govvies and Gold), and significant reversals (back to the ‘risk-on’ US dollar “carry trade” in foreign exchange) were all apparent. And substantially due to the FOMC opting-in to a consensus the Federal Funds rate should remain effectively at zero for much longer than the middle of next year projected at their last meeting.

That summary view is all the reasonable response we anticipated in yesterday’s post on Gusher Ben attempting to push psychology upward from underneath hoping that the enthusiasm will pop like an oil ‘gusher’. This is nothing less than a mind game version of quantitative easing (i.e. de facto Q3.) All of the specific asset class analysis and the intermarket implications that came home to roost by yesterday’s Close spilled over into today were noted in yesterday’s analysis.

That said, the resilient equities have found a new/old cause for hope: fresh upbeat assessment of the potential for a Greek debt deal. EU Finance Minister Olli Rehn said this morning at Davos, “A Private Sector Involvement deal is imminent; if not today then likely over the weekend.” We shall see. Certainly everyone hopes he is right.  Yet there are several grounds for skepticism which even go beyond whether a deal can be crafted. There is now some concern whether the Greeks will sign on to something as modest as “reform” (forget “austerity”), and other issues remain.

2012/01/25: Quick Post: Merkel’s Jerry Maguire Moment, Obama, Apple, and Hungary & the Fed

© 2012 ROHR International, Inc. All International rights reserved.

Well, it seems to have finally happened… Germany’s Jerry Maguire Moment. At long last this week it is finally agreeing to “show (me) the money” to the rest of Europe hungering for greater funding for its sovereign debt bailout funds. However, that comes with significant strings attached, along the lines demanded previous on major moves toward closer integration of the European Union…

…and that is along much more stringent Teutonic fiscal lines. Those are at the very least distasteful to much of Europe, and completely unacceptable to the UK. That much was clear from Mr. Cameron’s rejection of the push for such an agreement at the previous EU Summit. As such, if Frau Merkel made her assertion during her meeting last week with French president Sarkozy that everyone should relax on the sovereign debt dilemma because the entire EU treaty was going to be ready for next week’s follow-on EU Summit, it appears as specious as we suggested when they announced it.

In fact, it only reinforces our view that might’ve seemed a bit extreme when we noted it one week ago: the bombastic, bi-polar nature of the leadership in Europe right now. As noted then, the vacillations are almost as troubling as the lack of real progress. If the rest of Europe is not going to go along (and there are others who disagree as well) with the extreme strictures in the German proposals for closer integration, then the only inference that can be taken is that Germany is not going to agree to greater funding of the rescue operations.

So maybe it is not a huge surprise she has also at least partially thrown Greece under the bus this morning by noting the bailout may not be working. What is interesting about that is she allows that the combination of the requisite billions of euros along with austerity does not seem to be getting the job done. And that last bit is the most interesting part.

2012/01/19: Critical Macro-Technical Decision Looming for the S&P 500 …and the Rest in Its Wake

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There is a very interesting macro-technical context to markets right now. As is the case in so many of these major psychological decisions, the S&P 500 is approaching a key technical resistance area that is also a major previous psychological decision threshold. That would be into the March S&P 500 future 1,310 area. There are quite a few reasons that is an important technical resistance.

Yet, the important fundamental/psychological aspects make this a very clear macro-technical crossroads for all the equities… and in that context the other asset classes as well. In the first instance, there is the fact that US is now leading the other, more challenged, equity markets higher. That is reasonable in light of improved US data pointing toward potentially better times in the key ‘conspicuous consumption’ economy.

2011/12/19: Quick Post: Observations and Weekly Reports & Events Calendar Now Available

© 2011 ROHR International, Inc. All International rights reserved.

The full calendar is available through the link in the right hand column. This is such a robust week once again, it is impossible to include anything but a fraction of the major influences in an overview. Yet, key aspects will be those that relate to the continuing debt and fiscal reform problems in Europe and less so US influences that are as goofy in their way, yet not as influential at present.

In addition to the continued sharp influences from the attempts to address the European Sovereign Debt Crisis, there is also going to be quite an impact from important scheduled reports, communication from central banks and bankers as well as political events and news releases, yet with much lighter government debt auctions.

2011/11/21: Quick Post: Observations and Weekly Reports & Events Calendar Now Available

© 2011 ROHR International, Inc. All International rights reserved.

The full calendar is available through the link in the right hand column. This is such a robust week once again, it is impossible to include anything but a fraction of the major influences in an overview. Yet, key aspects will be those that relate to the continuing debt and fiscal reform problems in both Europe and the US.

In addition to continued sharp influences from the seemingly still failed attempts to address the European Sovereign Debt Crisis, there is also going to be quite an impact from whatever the fallout might be from the now almost assured failure of the US Congressional Fiscal Reform Super Committee. Our perspective on that is there are far too many folks who are very sanguine about the actual failure for two reasons.

2011/11/11: Quick Post: Santa Claus is Coming to Town… Maybe

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“He’s making a list, checking it twice…” gonna buy stocks, but only if they’re nice…

…and therein lies the dilemma with any ‘Santa Claus’ rally this year.  As we have pointed out for many years now, there is no Santa Claus! This is actually much more so the “Santa Portfolio Manager” rally. The late year rally tends to be the case in years when equities are up nicely on the year, especially from the early part of the fourth quarter into the end of November.

That incentivizes portfolio managers who have any goodly amount of cash on the books to invest it rather than look ‘under invested’ compared to their peers. And no sensible manager waits until the last minute right into the holidays. In the down years there is often little or no late year rally, as the converse becomes true: managers seek to show plenty of cash.

The problem for managers attempting to ‘window dress’ their portfolios either way this year is the degree to which the US equities are right around last year’s Closing price levels. In addition they have been significantly schizophrenic of late, with major surges and downdrafts in the wake of constructive or abysmally negative news. The range of that news is also significant insofar as it encompasses everything from fiscal and debt crises to economic data and forecasts.

So it seems that Santa is quite conflicted this year as well. Whether the equities trend will continue to improve from last year’s finish, or put on another one of those sharp retrenchments back to quite a bit lower on the year remains in flux.

2011/11/07: Weekly Reports & Events Calendar Now Available

All in all, a very interesting week that also sees European debt auctions early in the week, followed by long-dated supply out of the US and Japan Wednesday into Thursday. After a slow start today, highlights of the reporting week include the fact that the US has returned to Standard Time in the wake of Europe and the UK doing so last week. Even with all of the major early month data and three significant central bank meetings out of the way last week, there is still quite a bit from scheduled reports and events to focus on this week.

There is quite a bit of central bank-speak, both from the Fed’s minions and European financial luminaries. We will undoubtedly be hearing quite a bit from the latter in any event, as the further evolution of the now wholly unwieldy European Sovereign Debt Crisis continues to unfold this week.

2011/11/04: Quick Post: Draghi Not Soggy. But Does G20 End Up Just a Cannes-Game?

There was quite a bit of concern about whether Signore Draghi taking the reins at the European Central Bank (ECB) would lead to a much looser regime that would ignore inflation. In the first instance he is an Italian central banker, who historically have been known to have no qualms about allowing significant amounts of inflation. While he has been personally committed to far more fiscal rectitude than any of his Italian predecessors, that still left a question in the air.

Especially so at a time when Italy is going to need seemingly massive help with its sovereign debt problem. There was some passing concern (nothing really too serious) that he might be overly accommodative in supporting the Italian government bond market through ECB purchases. And all of that was seemingly compounded by the first interest rate decision under his regime yesterday, as the ECB put through a surprise 25 basis point rate cut to 1.25%.

Horror of horrors? Well, not really. Along with the rest of the world, European inflation does remain very high at present. As such, an easing ECB seemed to be joining Fed Liquidity Lubrication Club. However, in the context of the recalcitrant rate rises into an obviously weakening European economy by hawkish predecessor Jean-Claude Trichet, the reversal of one of those hikes hardly makes Signore Draghi an inflation Dove.

In fact, the economic data all seems to have vindicated his decision to make a bold move at his first interest-rate meeting as ECB President. As events have evolved today at the G20 meeting in Cannes, he has also rejected the idea that the ECB should continue purchasing the sovereign bonds of Europe’s weakest fiscal sisters. In that regard his indication that the Euro-zone needs to get its European Financial Stability Facility (EFSF) act together (funding, mandate, leveraging mechanism) is wholly consistent with that of his predecessor. On the whole, a very solid showing.

However, whether the ECB has turned just a bit more dovish is the least of the equity market’s concerns. The now bizarre machinations in Greece, and more importantly the continued lack of agreement on the critical funding and operational aspects for EFSF are plaguing the markets today. The biggest problem seems to be recurring failure of lofty pronouncements followed by no credible details on all of these various rescue at fiscal reform plans. And once again at the G20 in France, it is all starting to feel like not much more than a Cannes-game!!

2011/11/03: Candy Coated Equities Spooked by Halloween Goblins… As Expected. Now What?

‘As expected’ might sound a bit presumptuous. Yet, it was not just our assessment that the broad success statements out of the European Sovereign Debt Crisis were a bit overblown. The record of these attempts by Europe to “declare victory and go home” since last Spring is that the full details of what’s been agreed is often “much less than meets the eye”. And so it is proving in this case on several fronts. Not the least of which are the dislocations to the entire process by the seemingly misguided Greek Prime Minister’s desire to hold a referendum on things that were already ostensibly decided. It seems that Papandreou can Mr. Berlusconi in Italy are playing to their domestic political base in ways that might be very troubling for not just Europe, but the global economy.

That is not to say there is not any good news out there. In fact, the only reason the European rescue compromises could possibly have propelled the US equities to a significant new near term rally high is that some other news was also (at least temporarily) improved. That includes the preliminary US Q3 Gross Domestic Product pushing back up to 2.5% after the very weak Q2 figures. There is also this morning’s unexpected European Central Bank 25 basis point rate cut to 1.25%. That provides about as constructive an influences as anyone can imagine, pending the credibility of Mr. Draghi’s performance in a little while at his first press conference as President of the ECB. With the equities already benefitting from economic data reversing from the dismal US ‘double dip’ risk on the previous economic releases, the December S&P 500 future push back up to key 1,246-50 resistance (with a buffer to 1,260-65) appears fairly critical.

And it may well be the case that the improved US economic activity will buffer what is becoming a weaker picture for Europe. And if not, the Fed is putting out hints once again that it is ready to engage in another liquidity injection operation; even if it can specifically designate it as clear quantitative easing (QE3.) However, in general the economic news has been weaker than expected this week once again, and that’s not good. Everything from Australian housing figures through to most of the Purchasing Managers Indices have been weaker than expected.

So, even beyond the additional problems with the Euro-zone Debt Crisis rescue package specifics and the Greek Prime Minister’s stubborn adherence to the idea there should be a referendum on Greek agreement with the deal, there is plenty else for the equities (and other markets) to be concerned about. It goes back to the basic question we have been posing for months now, does crisis mitigation amount to restoration of robust global growth? We remain very skeptical of that on broader cyclical considerations.

All of which raises the question of why the equities took the European Debt Crisis rescue package so constructively in the first place? It seems to have been a happy coincidence that the rest of the background was temporarily so positive at the same time. Yet, in addition to all of the obvious issues on bank recapitalizations, leveraging EFSF (European Financial Stability Facility) up to the desired €1.0 trillion ($1.4 billion), and the nature of the new collateral provided Greek bondholders accepting a 50% loss on their current bonds, there is another pernicious aspect going forward from a victory the European powers-that-be will ultimately find very Pyrrhic. Another part of the bitter filling beneath the alleged headline success’ candy coating.