Soos Global Market Musings: July 2013

Wednesday, July 31, 2013

Emerging Markets: Charts to Consider & Contemplate

Pictures tell thousands of words about what's been going on in EM equity markets of late. Below are some charts in slideshow format worth considering and contemplating....Please share any thoughts through our Connect Form (anytime) or through our Live Chat feature (during US market hours).
(Note: the charts can be enlarged by hitting the 4-arrows in the lower right hand corner...and then returned to normal size by hitting them again. Enjoy the show!!)

Emerging Markets Related Charts from SoosGlobal

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Morning Memo: Wednesday, July 31, 2013

"Morning Memo" begins below this "NOTE for NEWCOMERS" to "Morning Memo"...... Each morning, we post a short bullet-point list of noteworthy events, data, etc that find their way into the assessment of global markets. It's far from complete and is not meant to be an exhaustive reconciliation of all things that could possibly impact stocks, bonds, currencies and commodities! Rather, it's best viewed as a cryptic memo of "highlights", noteworthy items that took place in Asia, European and US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This will also serve as a useful review mechanism, as scrolling through the series of "Morning Memo" posts over time ought to summarily highlight what generally drove price action.
We hope you find this useful and informative....and as always, that you'll share feedback!!

5:30am ET...

Asia markets generally lower ahead of today's Fed FOMC statement in the afternoon, and before that, this morning's US Q2 GDP initial estimate (exp = 1%).
Nikkei down 1.5% on stronger Yen and some disappointing earnings releases.
China was up slightly on comments from senior officials in the Communist Party that they'd keep growth steady in the second half of 2013.
Taiwan..Q2 GDP bte (better than expected). 2.3% y/y. Driven by stronger consumer spending and still strong exports despite the concern that China's slowdown would hurt Taiwan exports. Recent gov't policies to promote int'l trade and to adjust capital gains tax policy were credited for today's data.
Germany...Retail Sales wte (worse than expected)! Big drop in June offset April and May's positive numbers. Heavy rains in early June the blame. Down 1.5% m/m and 2.8% y/y!! But Unemployment beat forecasts, w/the total jobless down 7k vs flat exp. Overall rate unched at 6.8%.
(chart sourced from the Financial Times' FastFT. Shows prior m/m in yellow, and today's actual and revisions in green.)

Eurozone Unemployment bte slightly @ 12.1% vs 12.2% exp.
more later....
US Q2 GDP bte @ 1.7% vs 1.0% exp, on strong consumer spending and business investment...but Q1 revised down fr 1.8% to 1.1%.
US..ADP btw @ 200k vs 183k exp.
IMF says Greece's bailout faces Euro11bn shortfall in '15.
FOMC...Fed says econ growth is 'modest'. Keeps QE at current pace. No comment re tapering.

One last thing...Have you seen our new "chat" and "contact" features? Please use them to connect with us with ideas, thoughts, questions, feedback. (Will be logged into 'chat' during NY market hours, and 'contact' all day. Looking forward to hearing from you!!).

Tuesday, July 30, 2013

Morning Memo: Tuesday, July 30, 2013

ICYMI (In case you missed it)...see out post from yesterday:

Stocks and Bond Yields are Positively Correlated, Right? Not so fast!!

South Korea's current account surplus fell in June from record highs in May reflecting slowdown in exports to China, South Korea's largest export market.
Japan..mixed data....household spending wte (worse than expected) in June, only up 0.4% y/y vs exp of over 1%. Unemployment, though, eased to 3.9% fr 4.1%. Industrial Output wte in June, but expectations for July were positive.
Australia..Home Building Approvals fall 6.9%, disappointing data given low interest rates which were meant to boost housing/economy. RBA head says if economy needs boost then he could cut rates despite higher inflation.
India...left rates unched at 7.25%. Said recent tightening moves could be undone over time and were meant to support the Rupee. Also cut GDP forecast to 5.5% fr 5.7%. Rupee weakened to 60 vs USD.
China..injected money into money markets to offset monthend liquidity issues.
Asia markets mostly higher on weaker Yen boosting Japanese exporters and on Australia's central bank gov's comments re possible rate cuts.
German...consumer confidence measure highest in six years.
European markets mostly higher on the open, helped by Germany's consumer confidence #s.
Barclay's plans on approx $9bn rights issue to boost capital.
Fed two-day meeting starts today.
Corn...ytd prices down 30%!
US Gov't takes action against JPMorgan for alleged rigging power markets. A $400mm settlement is expected to be announced today.
more later....

Monday, July 29, 2013

Stocks and Bond Yields are Positively Correlated, Right? Not so fast!!

There's quite a bit going on in the chart above, and some readers might have already moved on wishing not to engage in what they feared might be a complicated mind game of multiple technical contortions!

Fear not!

For those left standing, and reading, there's actually a not too difficult story here regarding the historical relationship between stock price movements and bond yields. Consideration of some of the historic and current relationships might help guide investors in the coming days/weeks/months as 'tapering talk' continues, and markets respond accordingly.

First, a tour through the chart. Some of this might be pretty basic to old hands in bond/stock analysis, but a simple review never hurt. The green line represents the price movements of the S&P 500 index over the past 15 years. The black line represents the yield on 10yr US Treasury Notes. To be clear, when the black line goes up, it means bond yields are rising and bond prices are falling. A quick scan of the past 15 years shows that in general, when stocks have gone up (green line going up), bond yields (black line) have also gone up (and in turn, bond prices, not shown in the chart, have fallen). So when people refer to the correlation between stocks and bonds, with regard to bond yields, the relationship is positively correlated, and with regard to bond prices, the relationship to stocks is negatively correlated.

Now, while the upper part of the chart that we've been referring to so far makes it look like those correlations exist, to be technically accurate, take a look at the lower portion of the chart where you'll see a line representing the relative price movements of 10yr Treasury Yields to S&P stock prices. As you can see, in the time periods identified as "A" and "B", the relationship in price movements was pretty steady, implying that when stocks moved in one direction, yields moved similarly.

Section "C", however, marks a notable difference showing a declining line which indicates that stocks were rallying during this period at a much faster pace than yields were rising. In fact, during the latter half of time period C (see D on the chart), yields were actually falling as stock prices were rising, a clear divergence from the usual historical relationship. Only in the past month (see E), since tapering talk hit full stride, have yields started to climb and begin to close that diverging move.

The key question now for investors is whether that divergence will continue to close, and if it does, will it happen due to stock prices falling? Or will it happen through rising yields? Both? This question is particularly relevant to investors who automatically assume that the way to 'hedge' their equity exposure in the portfolio is to buy bonds, on the presumption that, historically at least, when stocks falter, bonds rally and yields fall. The chart above, however, should, at a minimum, be reason for caution in that it suggests that it is certainly possible that stocks could suffer a setback without yields moving much at all, and we'd still be normalizing the historical trend! The market's clear concern over Fed 'tapering' could keep investors away from bonds even if those same investors have concerns about equity valuations being too high.

So, you may ask, where would an equity investor go with money that comes out of equities if not into bonds? In the "old days", the answer would likely be "money markets", but nowadays, with rates at or close to zero, that's not an appealing option for investors. What then does that leave? Cash! Cash is often overlooked as a legitimate asset class in its own right. In this low-to-no interest rate environment, not to mention one of relatively low inflation, cash is clearly in the lineup of investment choices when capital preservation is challenged by a view that both equities and bond prices could stumble.

With the Fed's FOMC meeting this week, along with their statement that will be released on Wednesday afternoon, we're sure to get more 'taper talk' that will impact stock and bond prices. The chart above is worthy of close monitoring throughout the week (and beyond) as a way of assessing the relative price movements of stocks and bonds, and in turn, the relative value of each as a position in an overall portfolio. The Pavlovian response of "sell stocks, buy bonds" may just not be the best formula this time around.

Stay tuned for updates as the week progresses.

Sunday, July 28, 2013

Weekend Memo: Sunday, July 28, 2013 and Morning Memo: Monday, July 29, 2013

"Weekend Memo" is a supplement to our daily "Morning Memo" series. Monday's Morning Memo is added below.
For 'newcomers' to our site, here's the story:
Each morning, we post a short bullet-point list of noteworthy events, data, etc that find their way into the assessment of global markets. It's far from complete and is not meant to be an exhaustive reconciliation of all things that could possibly impact stocks, bonds, currencies and commodities! Rather, it's best viewed as a cryptic memo of "highlights", noteworthy items that took place in Asia, European and US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This will also serve as a useful review mechanism, as scrolling through the series of "Morning Memo" posts over time ought to summarily highlight what generally drove price action.
We hope you find this useful and informative....and as always, that you'll share feedback!!

Weekend Memo: Sunday, 4:00pm ET

China...announced 'urgent' audit of overall public debt including local gov't debt. Background: to circumvent Central Gov't restrictions put on local gov'ts to prevent them from taking on too much debt, many local gov'ts turned to borrowing through unofficial channels and investment vehicles. The funds borrowed by local gov't were in turn used to invest in local infrastructure projects, many of which are not paying off as had been expected. As a result, there's a growing concern that large amounts of local gov't debt may not be able to be repaid, raising the risks of a financial crisis. The Central Gov't is spearheading the audit as they try to find ways to fund domestic investment in an economy that had long relied mostly on exports, which have been waning.

Egypt...what goes around, comes around: One day after 74 pro-Morsi protesters were killed by police, from the WSJ:
President Adly Mansour gave Prime Minister Hazem Beblawy the authority to allow soldiers to arrest civilians, reviving sections of an emergency law whose severity helped spark a revolution against former President Hosni Mubarak more than two years ago
US...Economic data: As if it's not hard enough deciphering US GDP data, this week there will be a total overhaul of the way GDP data is calculated, and all numbers going back to the early 1900's will be revised!! The estimated impact on headline GDP is to raise it by 3%! Also on Wednesday, Q2 GDP estimate will be released with estimates @ 1.1% annualized, but subject to wild swings in accuracy due to the revisions mentioned above.

This week in Economic Data: chock full!! The highlight will be the Employment data on Friday w/consensus hovering around 175k jobs. Before that, the Fed will hold a two day meeting and release a statement only, no press conference, so look out for 'tapering tantrums' by the market! And there's more, including pending home sales, Case-Shiller House prices, consumer confidence, Q2 GDP advance estimate....See this link to Briefing.com for all data w/estimates.

S&P's price history over the past couple of months w/annotated highlights:

Stocks/ETFs on the radar screen....fyi....(NOTE: this is a trial run using SlideShare.com. Below is a slideshow of several charts that are currently on the radar screen for further consideration, either as possible buys or sells. Please email or 'chat' w/us regarding more specific thoughts on each chart. You can view the slideshow in a new tab (and larger view) by hitting the link just below the chart below. Or, the slideshow can be enlarged in this tab by hitting the arrows in the lower right hand corner of the chart. Then, when you're finished viewing the slideshow, hit the arrows again in the lower right hand corner of the slideshow. Let us know what you think of this new feature!! Thx!!).

Various stocks and etfs for today's post slideshow from SoosGlobal

Morning Memo: Monday, July 29, 2013

5:30am ET...

Asia mkts broadly lower led by Nikkei down over 3% on stronger Yen and weaker exporter shares. The Yen has fallen vs the dollar over 20% this year. Recent Yen strength vs the USD with USD slipping below Y98 has put significant pressure on Nikkei in recent days.
China...Industrial profits wte (worse than expected) rose 6.3% y/y, far lower than the prev month's y/y rise of 15.5%.
China...money market rates shot up as we approach month-end as small banks look to build cash reserves and large banks held off on lending (Reuters).
European mkts opened slightly higher on corporate m&a deals and earnings news. But overall moves tempered by upcoming central bank meetings this week...Fed, ECB and Bk of England.
more later...
US...Pending Home Sales were lower m/m but bte (better than expected).

Friday, July 26, 2013

Morning Memo: Friday, July 26, 2013

Asia markets mixed, with Nikkei losing the most, down close to 3% on a firmer Yen on the heels of stronger than expected CPI data. USD slid below 99!
Samsung said smartphone sales would slow in Q3.
Greece met conditions to receive next tranche of bailout.
FHFA reaches $885mm settlement w/UBS over toxic MBS sales during '04-'07. Other banks being targeted by gov't for even bigger potential claims.
ECB..Happy Anniversay!! One year ago today, ECB head Draghi said he'd do "whatever it takes" to preserve the Euro!
European stocks modestly higher on earnings and positive analyst comments on the banking sector.
more later...

10:00am ET..

Michigan Consumer Sentiment hits 6yr high!!

Thursday, July 25, 2013

Morning Memo: Thursday, July 25, 2013

China...late yesterday announced stimulus measures including tax cuts and easier bureaucratic processes. Small supply-side steps to help stimulate the economy. Railway spending included.
Asia...markets generally lower on heels of listless and heavy US market, Caterpillar (CAT) disappointing earnings and gloomy outlook.....hurt metal, mining and auto stocks overnight.
South Korea...growth strongest in two years.
Europe...opening broadly lower.
German IFO confidence on business current conditions rose in July but the expectations component fell.
Spain...train derailment kills 77. Cause not linked to terror.
Spain..unemployment slightly lower, but still at ghastly high level, 26.3% and just under 6mm people. Those out of work 2+ years rises to 35% of total!
UK..Q2 GDP up 0.6% q/q, up 1.4% y/y, in line, and up from Q1 0.3%.
more later....

9:15am ET...

US Jobless Claims climb 7k to 343k, slightly wte.
Durable Goods..headline number strong, bte, but mostly transportation orders! Prior month revised up. Ex-transportation, unched, wte, vs +0.3% exp. Shipments of core capital goods (ex defense and ex trans) fell 0.9%.

Wednesday, July 24, 2013

Morning Memo: Wednesday, July 24, 2013

Japan's trade deficit wte (worse than expected) despite weaker Yen driven increase in exports....import cost increases continue to outweigh. The increase in both exports and imports, however, is testament to a stronger overall Japanese economy.
China...Mftg PMI wte, 11-mth low!! (HSBC Flash prelim estimate slipped to 47.7 indicating deeper contracting of mftg sector).
India...lower on heels of Reserve Bank of India's move yesterday restricting cheap funding sources to banks as a way to support the Rupee. Rupee rallied to 3-week highs, but stocks and bonds fell.
Australia...mixed inflation data leaves RBA next move uncertain. Headline CPI was bte. Core CPI was wte (worse than expected).
Europe...Markit Flash PMIs for Germany and France bte (better than expected)! In particular, Germany's #s @ 5-mth highs!
IMF..reverses decision on bringing Argentina hold-out case to US Supreme Court.
US Gov't expected to criminally charge the firm (not the person) SAC Capital.
more later

9:10am ET..

US..PMI bte!! Rises to four month high.

Tuesday, July 23, 2013

Morning Memo: Tuesday, July 23, 2013

5:31am ET.....(see 7:50am ET updates below)

Asia generally higher. China Premier says gov't will ensure economy grows above 7%. Vice Premier makes similar comments re gov't support for the economy, infrastructure and reform.
Japan raises economic outlook again, for the 3rd straight month, this time on heels of LDP (Abe's party) victory in Sunday elections of Upper House.
Tepco (Japan) admits radioactive leaks into the sea from Fukushima plant since disaster of Tsunami in '11
Indonesia..Rupiah continues to fall to lows since '09. Like other EM countries stung by slowing exports and sell-offs of EM assets on the heels of fears of QE ending, recall that Indonesia responded with a rate hike last month (counter-cyclical) to defend currency.
UK exports jump to six-yr high in Q2. Augurs for Q2 GDP @ positive 0.6% q/q pace which is in line w/most current expectations.
more later....
7:50am ET...
Turkey hikes overnight lending rate to support Lira.
India...RBI puts curbs on gold imports as a way to support the Ruppee which remains under pressure.
Ireland...house prices rise for first time since crash.
US...earnings parade continues, highlighted today w/Apple's earnings....more later....

Monday, July 22, 2013

Morning Memo: Monday, July 22, 2013

ICYMI (in case you missed it), see our posts from late last week:

Chanos put CAT in the litter box....Did it need his help?

Detroit: Polly-anna Pundits vs Muni-Armaggedonistas...."Kentucky Fried Movie" 1977

Japan...Abe's LDP party wins landslide election and captures Upper House (already has Lower House). Augurs for full-speed ahead on stimulus! Asia mkts generally higher.
China...Glaxo admits possible wrong doing in bribery scandal. Other pharma firms under the hot lights too.
Portugal political crisis deepens. Over the weekend, three main political parties failed to reach a 'national salvation pact' related to international bailout deal. At the center of the issue is fiscal austerity.....and unemployment, currently over 17%. PM rules out snap elections and tries to keep current coalition in place.
France...riots over the weekend as police enforce 'burka law'..the prohibition on wearing full-face covering.
European markets opened lower and moved into positive territory ahead of US.
US..SEC takes up civil charges vs SAC's Steve Cohen. Fed reviews banks' ability to carry and be active in physical commodities. Deutsche Bank to shrink its balance sheet by 1/5.
more later....
US Existing Home Sales wte (worse than expected) in June.
Earnings parade continues...McDonald's disappoints and cites global consumer caution on spending and economic uncertainty.

Friday, July 19, 2013

Chanos put CAT in the litter box....Did it need his help?

I have a bone to pick with market participants!

Let's begin with a disclaimer. I currently own Caterpillar (CAT), representing roughly 1.5% of each of our two strategies. We consider that a relatively lite position. CAT has been a familiar name in our investment thesis for the past three years, in varying degrees of exposure, as the emerging global infrastructure build-out argued for CAT to be a primary beneficiary of demand for equipment of all types.

Their acquisition of Bucyrus added to the cat's meow, at least it was supposed to, as the company's product offering expanded meaningfully into the mining equipment space. This was meant to capture the global supply/demand imbalance where miners could hardly get metals and raw materials out of the ground fast enough to meet growing needs especially of emerging market countries.

As we've been plowing our way through 2013 and witnessing sluggish growth in the US, ongoing recessions in Europe, and most notably, a slowdown in China (not to mention in other EM countries, several of whom have had to deploy counter-cyclical policy responses such as tightening interest rates to defend weakening currencies and to fight inflation), the cat has been seemingly de-clawed, as the market has taken the stock price down from early-February levels in the high 90s down to 80-ish before rebounding to the high 80s of late.

Now to the bone to pick....

This past Wednesday, at a conference in NYC sponsored by CNBC and Institutional Investor called Delivering Alpha, a line-up of celebrity investors were present to opine on markets, policy and various investments. Jim Chanos, of shorting-Enron fame among other notable achievements, was rightfully among the speakers. He commented that he was betting against CAT, upon which, the stock immediately tanked!

My comments have nothing to do with Chanos....he's earned his celebrity status over many years of impressive performance and insights into complex matters.

My issue is with markets...did the market really need to hear that Chanos is short CAT in order to sell the stock off close to 3% as the words left his lips? Did he impart some new information, formerly unknown to market participants, that created a deserved revaluation of the company, especially to that degree? (There are some who'd argue that, after all, into Chanos' short, had to be someone, perhaps of lesser fame, or not, going long)!

If the market wanted to put CAT into the litter box, it didn't need Chanos' short position to get it there. Plenty of solid fundamental issues face the company that have caused the revaluation from last years highs...in addition to those noted above, you could add management's misstep in acquiring ERA Mining Machinery and its subsidiary Siwei last year...a Chinese company that CAT acquired in June 2012 for $653mm and by Jan 2013 had to write off almost all of that amount ($580mm) due to subsequent discovery of "deliberate, multi-year, coordinated accounting misconduct". Or you could note the expensive acquisition of Bucyrus which has presented integration and synergy challenges coincident with the global mining sector suffering under the cloud of slowing growth and over-supply of machinery in places like China and other EM countries. Or you could note the rapid technology transfer (aka: pilfering) that has allowed CAT's competitors in EM countries to become more formidable.

In any event, the reasons are ample to be cautious on the stock, and depending on one's view of the global growth outlook in coming quarters relative to the pounding that the stock has taken, one may decide that current valuations properly price upside opportunity...or not. But to tag the stock 3% on a celebrity short-position, begs the question as to whether such emotional behavioral repricing might just be the bigger opportunity after all! Just a thought.........

Detroit: Polly-anna Pundits vs Muni-Armaggedonistas...."Kentucky Fried Movie" 1977

Is anyone really surprised that Detroit filed for bankruptcy?

In the language of teenagers....P-LEASE!!!

Reuter's makes it quite simple...Have a look at their "TIMELINE- A brief history of Detroit's fiscal problems".

The anguish of the city and it's citizens doesn't begin w/yesterday's bankruptcy filing...the anguish has been regrettably alive and well for some time, albeit on fewer and fewer people as the population has declined considerably in recent years.

The bankruptcy will hopefully mark the beginning of a new chapter for Detroit that will bring in private capital (billions have already flowed in to buy property on the cheap), and to restructure the city's finances in a way that is long term sustainable.

From the perspective of direct impact on our portfolio and overall risk assessments, we have no municipal securities in the portfolio. The more relevant risk to consider is if Detroit is the first of more to come....if we're facing an avalanche of municipal defaults that could collectively create the next broad-based financial crisis, exacerbate unemployment, crush consumer demand, etc. That is what to look for.....and while the pundits this morning are quick to point out that Detroit's debt load is multiples of all other municipalities, making the case that Detroit is the outlier and does not portend a muni domino collapse.....It's worth considering names like Harrisburg, PA, or the State of California, or Jefferson County, Alabama....and there are others....who have recently either defaulted or issued IOUs until they could come up the cash to pay up on debts.

Bottom line....the reality is likely to be somewhere in between the poly-anna pundits of today and the muni-armaggedonistas like Meredith Whitney.

We are likely to continue to see stresses and strains on state and local government finances for some time to come and assessment of each case should be weighed on its real economic impact not only on the municipality, but on companies directly impacted in that region and by broader economic implications.

But one thing's or sure...to walk away from last night's Detroit Defaults headline with the following reaction might just be a bit overdone: (From "Kentucky Fried Movie" 1977)

Morning Memo: Friday, July 19, 2013

ICYMI (in case you missed it), see our posts from yesterday:
Keep your eye on bank funding risks...and on banks.....

Celebrating historic market highs with defensive positions and value hunting.....

Asia generally lower after late news in US re earnings. Two big misses..Google and Microsoft.

Nikkei closed lower by 1.5% after very volatile session ahead of Sunday's parliamentary elections (Upper House) where Abenomics (LDP Party) is expected to be further endorsed. (LDP already has majority in Lower House. A majority outcome in the Upper House election is expected.)

China imposes tariffs on solar panel inputs coming from the US, exacerbating an already tense trade relationship.

Europe mostly lower on the open.

Oil (WTI) hit new highs.

US...reminder...late yesterday, Moody's affirmed AAA rating and raised outlook to 'stable'.

US...another reminder....later yesterday....Detroit filed for bankruptcy.

more later...
Spain..protests against PM Rajoy over allegations of corruption in a slush fund scandal turned violent. Pressure on Rajoy to resign intensifies.
China...announced changes to bank lending rules...the minimum rate on loans was eliminated (allowing lenders to lend to more credit worthy borrowers at lower rates). Maximum rates and deposit rate curbs were not changed. Part of financial market reform.
Fund Flows...equity fund inflows this past week ($19.7b) was the most in six months and the highest since the '08 financial crisis! Bond fund outflows were $700m)

Thursday, July 18, 2013

Celebrating historic market highs with defensive positions and value hunting.....

As the headlines are racing across the screens from every direction touting the equity markets' historic new highs, Morningstar's economist, Bob Johnson, notes (in the embedded video below) some sobering facts about Q2 GDP (advance estimate due out on July 31).....worth considering....

If you don't have time to watch the interview, in a nutshell, he points out how this week's economic data has raised some concerns about US Q2 GDP, and estimates might come in under the 1.8% of Q1. Notably, retail sales was relatively weak with the exception of auto sales, and the CPI increase at the headline level of 0.5% implies quite underwhelming real consumer spending going on. In addition, the housing data, starts and permits, were also uninspiring, and all of this comes as business investment seems unlikely to ignite aggressively, Government spending and sequestration impacts continue to present headwinds to growth, and around the world, Europe's recessions and China's growth taking on more downside risks, all point to a first half GDP in the US that could well undershoot the Fed's presumed 2.4% target for 2013.

Now, 'bloggees' of this blog-o-sphere will note that I'm "talking my book" in that I've been positioned quite defensively and remain with relatively high levels of cash, looking for "buying on dips" opportunities. If Morningstar's economist is correct, I may just get my chance in coming weeks. In the meantime, the earnings parade is providing some opportunities to buy quality names when reactions to small misses seem to be overreacted to by short-term horizon traders. In addition, yesterday's Delivering Alpha conference, hosted by Institutional Investor and CNBC, showed the impact that celebrity type investors can have when they acknowledge a long or short in a name....witness Chanos' impact on Caterpillar and Peltz's impact on DuPont.

In any event, 'defense' remains the operative word, though value hunting is ceaseless!

Stay tuned for further granular updates....

Keep your eye on bank funding risks...and on banks.....

S&P warns of funding risks beyond Europe and US... | More on http://t.co/8x3DrCkFc7
— Financial Times (@FinancialTimes) July 18, 2013

(NOTE: The link in the embedded Tweet above takes you to the FT's "Fast FT" site where you may have to scroll down to find the posting on the S&P bank funding study. The actual study from S&P was just tweeted and is included here:

S&P Study Compares Funding And Liquidity Risks In Several Banking Systems Around The World. Info here: http://t.co/KtWFjhs7We
— Standard & Poor's (@standardpoors) July 18, 2013 )

.

This analysis (above) from S&P on the state of affairs with global bank funding risks is probably not a siren alarm for an imminent global financial crisis a la 2008. In particular, US banks are cited as having improved balance sheets and more stable funding sources. But peripheral countries in Europe and many Emerging Market countries deserve closer scrutiny over time.
Q2 bank earnings in the US have so far been quite impressive on balance....in general, we've seen solid balance sheets, more cleansed risk asset portfolios, some interest spread income....but loan growth has been underwhelming. In addition, there remains a sword of Damocles over the sector thanks to constant calls for more and more regulation, great uncertainty over how Dodd-Frank will evolve, and ongoing demands for increased capital requirements.
From a performance perspective, the S&P Financial sector, which was scorched in the '08 crisis (first chart below), has been on the comeback for some time (second chart below):

I'm watching the sector closely, though remain quite lite overall. I'm looking at finding value plays within the sector, for example, Citigroup (C), where leadership change within the institution has already proven more impactful on valuation than the overall industry headwinds.

Morning Memo: Thursday, July 18, 2013

Bernanke's testimony yesterday left markets relieved that further stimulus is here to stay...(until it isn't!) and the Beige Book which found expanding manufacturing, rising consumer spending, stable to growing services activity, and moderate to strong residential real estate and construction, confirmed a moderate pace of expansion. All told, enough to keep markets generally positive, but not euphoric.
After hours earnings by Intel disappointed, but IBM beat and had positive outlook sending Asia enough reason to trade generally higher. Nikkei up, China down.
Australia...business confidence and conditions weakened in June.
IMF will ask the US Supreme Court to take up the Argentina vs "Holdouts" case with potential big implications for future sovereign debt restructurings. Been going on since '01....worth watching closely.
IMF warns that China's growth is slowing and reforms must be implemented more quickly.
India....the RBI's move to tighten liquidity earlier this weak in defense of the Rupee has sent bank shares down hard earlier this week. Earnings from nonstate banks beat, so today saw some bottom-fishing bounce.
European stocks mixed, with little momentum ahead of 'Bernanke Day 2"....
Brazil...have you already bought tickets for the '14 World Cup? Hope not....Fifa is questioning whether Brazil should still be the site for the '14 Wrold Cup based on recent wide-scale protests re the economy, transportation costs, etc.
Russia...care to oppose Putin? As opposition leader Navalny who was just sentenced to five years in a prison camp for what he claims is a fabricated case of stealing timber. Russia's stock mkt dropped close to 2% after the sentence was announced.
India....adding 50,000 troops to China border, viewing China as bigger threat than Pakistan! (That's not to say that Pakistan is less of a threat...just less relative to China....Hmmmm.....)
US Jobless Claims bte (Better than expected) though seasonal adjustments might explain some of it away.
Philly Fed Index...much bte! Highest since March '11, though new orders softened.
Moody's upgrades US AAA credit rating outlook to 'stable' from 'negative'
Detroit files for bankruptcy!!