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发表于 2013-3-3 11:34 PM
Greedometer Newsletter February 27 2013: WOW!
The Top Line
Last week the Greedometer continued its climb, reaching 7900rpm. Epic!
No, Mr. Market, I expect you to crash. Here’s a link to a video of the Greedometers before and during the 2000-2003 crash. (FYI: all the videos have been moved to a new location on youtube called Greedometer Author. I recommend viewing the video in 720p mode.
Here in the US:
- Last week, the rats were still jumping ship — and set a new record pace. Corporate insiders were dumping shares at over 10X the rate they were buying on the NYSE. I use a 4-week moving average of total insider sells/buys across all US exchanges to smooth-out noise. On that basis, 2013 is indeed shaping up just like 2007 and 2011 so far. Corporate insiders are acting like a crash is going to initiate in 2013. Who am I to argue?
- I’ll make a comment regarding the above diagrams. Some people are mis-interpretting the Greedometer warning (mind you they are not asset management clients nor newsletter subscriber clients). In an effort to paint as clear a picture as possible to as many as possible, I want to make this point clear. The fact that insiders were manically dumping their shares over the past month does not suggest the stock markets are going to begin to melt down today. Look at the charts (above) for 2007 & 2011. The S&P500 climbed a little higher in April and July (and less than 1% higher again in October 2007). Even though QE3 & QE4 are likely to remain until year end, I doubt the party will last that long. More data (different data source) needs to be considered. Insider selling is 1 of 9 input parameters to the Greedometer gauge, and 1 of 4 inputs to the mini Greedometer gauge. The amalgamated view presented by both algorithms is painting a clear picture.
- Greed is Back!: One of the 9 input parameters to the Greedometer algorithm is Margin Debt used on the NYSE. This is the amount of money borrowed from broker-dealers to invest “on margin”. Margin debt exemplifies greed and is the inspiration for the Greedometer name because it peaks at secular stock market peaks. The all-time high margin debt figure was $381B in July 2007. At the time, it was also an all-time S&P500 peak. As we know, the market took a short breather then rallied a fraction of a % higher in October to a new all-time high, then proceeded to throw up for the next 1.5 years. Well folks, Greed is back! The NYSE released their January margin debt figures today (Yes, I know it’s a month late. It’s their data.) Margin debt for January 2013 was $364.1B. Given how the market has performed, it is a virtual certainty that February will see $380-385B in margin debt — equaling or eclipsing the all-time high that was seen when the S&P500 was within 1% of the all-time high. If you had to write a script for a market crash pre-amble, it would include this attribute.
- Q4 2012 earnings season is all but done. As-reported profit margins dropped to roughly 7.65%. Profit margins are mean reverting. Given that they peaked in late 2011-early 2012 at record heights, you know what has to come next.
- US Treasuries. Don’t look now, but the much hated (by Wall St) US Tnote is rallying. This week sees US Tnote auctions of the 2yr, 5yr, and 7yr persuasion. The yield on the 5yr Tnote is 0.78%. The yield on the 10yr Tnote has dropped from 2.05% to 1.88% over the past 2 weeks.
- Ben says he’s going to keep his foot on the accelerator for the printing press. Don’t look for QE3/QE4 to end until some point next year.
- The US Housing market had a very strong autumn last year. The Case Shiller data suggests some healing in the housing market is afoot. But the shadow inventory still needs to be rationalized.
- The Chicago Fed’s National Activity Index for January was released earlier this week. There were major revisions to previous estimates for November and December. The upshot is that as of October, the US economy likely stalled, but the Fed’s QE3 & QE4 “help” probably re-ignited sentiment and supported some economic growth in Q4. I look for the BEA to raise their Q4 GDP estimate from -0.1% to something like +0.5%. My revised view is for the US economy to stagnate in Q1 2013, then re-enter recession in May.
Global Macro View:
- Italy: Federal elections produced a mixed and unstable result. A centre-left party has control of the lower House of Parliament. But there’s no clear control of the senate. It will be near impossible to pass any legislation. With a centre-left party controlling the lower House, the chances are not good that fiscal austerity measures necessary for ECB bond buying support will be delivered (so much for the OMT – I call it VOMIT- program saving Italy).
- The U.K.: Moody’s Investor Services finally downgraded Britain’s sovereign credit rating from AAA (Moody’s top rating is called Aaa). The U.K. pound has been pounded relative to every major currency except the yen.
- Spain’s updated budget deficit estimate show it has no chance of meeting its 3% deficit target this year, and none next year either. The same is true for France -though it is much closer to the objective.
- Germany. The German export machine needs a cheaper euro currency. Instability resulting from the Italian election may be music to their ears. However, German voters are going to be aware of the Italian election, and therefor in less of a giving mood from here on out.
- China: The “flash” estimate (preliminary) for February’s PMI showed a slowing pace of growth and agrees with my forecast. The trend is not your friend, when it comes to Chinese manufacturing data.
The Greedometer
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Kind regards,
Jeff Seymour
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发表于 2013-3-4 12:06 AM
