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Saturday, August 24, 2013
Consumer Prices Rise Just 0.1% In May
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BRIAN BELSKI: 'Investors Should Prepare For More Back-And-Forth Action This Summer'
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Brian Belski: 'Investors Should Prepare For More Back-And-Forth Action This Summer' (BMO Capital Markets)
BMO Capital Markets' Brian Belski maintains his 1,575 S&P 500 year-end target. In a new note, he writes, "To be clear, we continue to believe US stocks are the most attractive fundamental asset in the world, a quality that should define performance and allocations for the next several years." He also writes that U.S. stocks are "in the midst of their next secular bull market."
But he is worried that investors are using "very little analysis, process and common sense (at least on a near-term basis)" in making investment decisions and that they are ignoring the "downside risk associated with stock prices disconnecting from fundamentals."
With recent disappointing consumption, manufacturing and employment data, Belski writes that investors should "prepare for more back-and-forth action this summer – not just up and not just down – as the market sifts through what is likely to be choppy fundamental and economic data in the coming months."
FINRA Regulator Resigns After A Charitable Bingo Fraud Is Revealed (Bloomberg)
A letter from former securities broker David Evansen to Richard Ketchum, CEO of FINRA, and Susan Axelrod, executive vice president at FINRA, is believed to have prompted the resignation of FINRA official Mitchell C. Atkins.
Atkins was a regional director and head of FINRA's District 7 in Boca Raton, Florida. Evansen's letter showed that Atkins had pleaded guilty to charitable bingo fraud in 1993. "Evansen said he looked into Atkins’ past after he decided Atkins and his staff weren’t considering his communications about an enforcement case against him," Bloomberg reported.
There Has Been A Paradigm Shift In Many Investors' Attitude Towards Gold (Societe Generale)
After talking with clients, the opinion of Société Générale analysts hasn't changed. They think the gold sell-off, along with concerns about Fed tapering, have caused "a paradigm shift in many investors’ attitude towards gold."
"This is likely to result in continued large-scale gold ETF selling this year and next ... ETF gold selling has averaged about 100 tonnes per month since the April sell-off. We expect continued ETF selling to exceed higher demand for jewelery/bars and coins. Therefore, we have revised lower our Q4 13 gold forecast to $1,200/oz."
Societe GeneraleBrokerages Are Giving Advisors Bigger Payouts To Craft Financial Plans (The Wall Street Journal)
Many advisors don't create financial plans for their clients. But brokerages have found that clients with financial plans are less likely to move their business to a competitor. With that in mind, the Wall Street Journal reports that more brokerages are trying to get their advisors to begin financial planning and are throwing cash at their advisors to do so.
UBS Wealth Management Americas is now giving advisors a payout that would be 50% of the charge of the plan, as long as the plan is over $1,000, and 15% credit to the advisor's expense account, the WSJ reports.
Stan Druckenmiller Explains Why Hedge Fund Managers Don't Like Ben Bernanke (Goldman Sachs via Zero Hedge)
In an interview with Goldman Sachs, American hedge fund manager Stanley Druckenmiller explained why hedge fund managers don't like Fed chairman Ben Bernanke. Via Zero Hedge:
"It has become harder for me, because the importance of my skills is receding. Part of my advantage, is that my strength is economic forecasting, but that only works in free markets, when markets are smarter than people. That’s how I started. I watched the stock market, how equities reacted to change in levels of economic activity and I could understand how price signals worked and how to forecast them. Today, all these price signals are compromised and I’m seriously questioning whether I have any competitive advantage left.
"Ten years ago, if the stock market had done what it has just done now, I could practically guarantee you that growth was going to accelerate. Now, it's a possibility, but I would rather say that the market is rigged and people are chasing these assets, without growth necessarily backing confidence. It's not predicting anything the way it used to and that really makes me reconsider my ability to generate superior returns. If the most important price in the most important economy in the world is being rigged, and everything else is priced off it, what am I supposed to read into other price movements?"
Stan Druckenmiller Gave A Startlingly Blunt Reason For Why Hedge Fund Managers Don't Like Bernanke
It's no secret that a lot of hedge fund managers on Wall Street have no love for Ben Bernanke or his monetary policy. Journalists, economists, and pundits have mused on the reason why more times than anyone can count.
For their part, hedge fund managers usually say that they fear Bernanke's policies will lead to rampant inflation — a massive problem in the United States in the 1970s when many of them were coming of age.
That danger, however, remains to be seen in our economy as, in fact, deflation continues to be a risk.
So why do hedge fund managers hate Ben Bernanke? In an interview with Goldman Sachs, Stan Druckenmiller, a known Bernanke detractor gave a candid explanation we never thought we'd hear from a hedge fund manager.
He was answering a question about whether or not investing had become more difficult in recent years (via ZeroHedge):
It has become harder for me, because the importance of my skills is receding. Part of my advantage, is that my strength is economic forecasting, but that only works in free markets, when markets are smarter than people. That’s how I started. I watched the stock market, how equities reacted to change in levels of economic activity and I could understand how price signals worked and how to forecast them. Today, all these price signals are compromised and I’m seriously questioning whether I have any competitive advantage left.
Ten years ago, if the stock market had done what it has just done now, I could practically guarantee you that growth was going to accelerate. Now, it's a possibility, but I would rather say that the market is rigged and people are chasing these assets, without growth necessarily backing confidence. It's not predicting anything the way it used to and that really makes me reconsider my ability to generate superior returns. If the most important price in the most important economy in the world is being rigged, and everything else is priced off it, what am I supposed to read into other price movements?
In short, Stan Druckenmiller is now in a world he doesn't recognize, and it's making him feel useless.
Earlier in the interview he acknowledged that he "understood the need for QE1 because the U.S. economy faced a potential meltdown." That implies that the precarious, low-growth situation we're in now isn't a good enough reason (in Druckenmiller's eyes) to continue a policy that makes him and many of his peers feel like aliens in their own home.
It is, however, good enough for Japan. Druckenmiller has called Abenomics "appropriate."
The problem with that is simple — it goes against all the "best advice" and the "golden rules" and the maxims traders have passed down about the market for years.
You've heard them all: "Adapt or die." "Have an unquenchable thirst for knowledge." "Don't trade on emotions or ideology."
Those aren't all direct quotes, but you get the picture. Hedge fund managers aren't supposed to be upset about market factors they can't control, even if those factors are controlled by a person. They're supposed to understand the market that exists and come up with the appropriate strategy.
Wall Street is not a 'shoulda, coulda, woulda,' kind of place.
The Chinese Credit Bubble In Four Charts
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STOCKS RALLY: Here's What You Need To Know
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Sell-Off Gets Worse As Taper Fears Seize The Market
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