Countries & Regions Archives - Page 155 of 381

August 10, 2014

Is a Hard Life Inherited? | NYTimes.com

Nicholas Kristof writes in the New York Times:

ONE delusion common among America’s successful people is that they triumphed just because of hard work and intelligence. In fact, their big break came when they were conceived in middle-class American families who loved them, read them stories, and nurtured them with Little League sports, library cards and music lessons. They were programmed for success by the time they were zygotes.Yet many are oblivious of their own advantages, and of other people’s disadvantages.

….This crisis in working-class America doesn’t get the attention it deserves, perhaps because most of us in the chattering class aren’t a part of it.

There are steps that could help, including a higher minimum wage, early childhood programs, and a focus on education as an escalator to opportunity. But the essential starting point is empathy.

August 10, 2014

Australia’s Major Banks Say The Murray Enquiry Used The Wrong Numbers… | Business Insider

From Greg McKenna:

The AFR reports ….the Australian Bankers Association CEO Steven Munchenberg said the banks are “concerned that if some of the statements in the interim report – that Australia’s capital is middle of the road, that housing is a systemic risk – are allowed to remain unchallenged and are then taken out of context that is going to cause us a lot of future grief”.

Munchenberg says the Inquiry hasn’t calculated the capital ratios correctly.

“The approach was simplified and didn’t take into account the complexities and nuances of how capital is determined in Australia, including deductions required by APRA and some of the areas where APRA has adopted a more conservative approach, and as a result underestimated the amount of capital in Australia relative to overseas”, he told the AFR.

Forget the nuances and comparisons to the plight of other banks. Australian banks need to almost double their capital and adopt a more conservative approach to home mortgage lending if they are to withstand future shocks. 3 to 5 percent capital against total exposure doesn’t get you very far. The history of low mortgage failures over the last 3 decades, in an expansionary phase of the credit market, is unlikely to be repeated during a contraction.

August 9, 2014

Why is the Yield Curve Flattening? | PRAGMATIC CAPITALISM

Interesting view from Cullen Roche:

Most fixed income traders view long rates as a function of the economy and short rates as a function of the Fed’s views on the economy. So, when the Fed increases rates it means that the Fed thinks the economy is improving and needs some tightening so it doesn’t cause the Fed to create too much inflation and overheat the economy. But fixed income traders account for this and front-run the Fed’s thinking by trying to anticipate their views on the economy. Said more simply – long rates are a function of short rates for the most part. And the fact that long rates are remaining low means that fixed income traders increasingly believe that we’re in a permanent state of low interest rates.

August 8, 2014

Europe tests primary support

Summary:

Europe threatens reversal to a down-trend.
S&P 500 finds support.
VIX continues to indicate a bull market.
China’s Shanghai Composite encounters selling pressure.
ASX 200 experiences a secondary correction.

Dow Jones Europe Index is testing the primary trendline and support at 315. 13-Week Twiggs Momentum below zero already warns of a primary down-trend. Breach of primary support at 315 would confirm. Respect of primary support and recovery above 330, however, would suggest that the primary trend is intact.

Dow Jones Europe Index

Germany’s DAX continues to test primary support at 9000. A long tail on Friday suggests short-term support. Failure of support would warn of a decline to 8000*, while respect would suggest another test of 10000.

DAX

* Target calculation: 9000 – ( 10000 – 9000 ) = 8000

The S&P 500 found support at 1900 and recovery above 1950 would indicate another advance. The latest decline on 13-week Twiggs Money Flow is relatively small and recovery above its July high would suggest that buyers have taken control. Failure of 1900, however, would warn that the primary trend is slowing.

S&P 500

* Target calculation: 1500 + ( 1500 – 750 ) = 2250

CBOE Volatility Index (VIX) spiked upwards, to between 16 and 17, but remains low by historical standards and continues to suggest a bull market.

S&P 500 VIX

China’s Shanghai Composite Index encountered selling pressure below resistance at 2250, with tall wicks/shadows on the last two weekly candles and a sharp fall in 13-week Twiggs Money Flow. Reversal below 2150 would warn of another test of primary support at 1990/2000. Follow-through above 2250, however, would confirm a primary up-trend.

Shanghai Composite

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

The ASX 200 is heading for a test of support at 5350/5400 and the primary trendline. Direction will largely be influenced by the US and Chinese markets, but reversal of 13-week Twiggs Money Flow below zero — after long-term bearish divergence — would warn of strong selling pressure. Recovery above 5550 is unlikely at present, but would suggest another advance. Reversal below 5050 is also unlikely, but would signal a trend change.

ASX 200

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

August 7, 2014

Vladimir Putin’s pointless conflict with Europe leaves it a vassal of China – Telegraph

From Ambrose Evans-Pritchard:

European officials calculate that Mr Putin will not dare to cut off energy supplies, since to do so would bring the Russian state to its knees within months. But even if he tried – as a shock tactic – it would not achieve much. Oil can be obtained anywhere.

Europe’s gas inventories have risen to 81pc of capacity, up from 46pc in March. Britain is at 94pc……Japan has just given the go-ahead for two nuclear reactors to restart in October, with seven likely by the end of the year. Koreans are also firing up closed nuclear reactors. All this frees up LNG.

Whether this is fruit of a co-ordinated strategy, the net effect is that inventories and spare LNG could cover a Russian cut-off for a long time, probably through the winter with rationing. Areas of eastern Europe have no pipeline supply from the West, but “regas” ships could plug some gaps in an emergency. The gas weapon is not what it seems.

The Kremlin is counting on acquiescence from the BRICS quintet as it confronts the West, and counting on capital from China to offset the loss of Western money. This is a pipedream. China’s Xi Jinping drove a brutal bargain in May on a future Gazprom pipeline, securing a price near $350 per 1,000 cubic metres that is barely above Russia’s production costs….

August 7, 2014

Falling crude prices are good news

Crude oil prices are falling sharply. Nymex Light Crude broke support at $98/barrel and Brent Crude is testing support at $104. Breach of that support level would confirm a primary down-trend.

Nymex WTI Crude

The theory has been bandied about that lower crude prices are a Barack Obama strategy to deter Vladimir Putin in East Ukraine. But there are signs of an economic slow-down in Europe, especially Italy, that would hurt demand for Brent Crude. And the Baltic Dry Index, which reflects bulk commodity shipping rates, indicates global trade is at a low ebb. Whichever is correct, low crude prices are welcome — good for the medium-term outlook of the global economy.

Baltic Dry Index

August 6, 2014

ASX equity shrinking

From Chris Pash:

Credit Suisse’s Equity Strategist Hasan Tevfik says the cost of debt is very low relative to the cost of equity….This means that few equities are being added to the Australian market because companies are using cheap debt, rather than going to their investors or shareholders, to raise cash for expansion or investment.

This is not a healthy sign — when companies use cheap debt, rather than equity, to fund acquisitions. Artificially low interest rates distorting companies’ WACC (weighted average cost of capital) could lead to poor investment decisions.

August 6, 2014

ASX 200 faces 3 major factors

The ASX 200 found short-term support, with a long tail at 5500, but there are no significant volumes to indicate a concentration of buyers. Expect further weakness unless the Dow and S&P 500 reverse direction overnight. The monthly chart below portrays a long-term view, from 2007 to the present. Three factors stand out:

medium-term support at 5400;
primary support at 5000/5050; and
bearish divergence on 13-week Twiggs Money Flow.

Respect of support at 5400 and the secondary trendline would signal continuation of the current strong primary trend. Breach would signal a test of primary support. Failure of primary support remains unlikely. But bearish divergence on 13-week Twiggs Money Flow warns of selling pressure. The indicator often dips below zero in a weak trend, but reversal below zero after a large divergence would be a strong bear signal. One cannot, however, anticipate this. TMO could just as easily recover above the descending trendline, signaling that buyers are back in control.

ASX 200

* Target calculation: 5550 + ( 5550 – 5350 ) = 5750

August 6, 2014

Asian tigers and the PBOC

Asian stock markets are lifting on the prospect of increased trade with mainland China. Hong Kong’s Hang Seng Index broke long-term resistance at 24000, signaling a primary advance. But first expect retracement to test the new support level. Respect of 24000 would confirm the target of 27000*. A 13-week Twiggs Money Flow trough at zero indicates long-term buying pressure. Reversal below 24000 is unlikely, but would warn of a correction to the rising trendline.

Hang Seng Index

* Long-term target calculation: 24000 + ( 24000 – 21000 ) = 27000

Singapore’s Straits Times Index is also retracing after breaking resistance at 3300. Follow-through above 3400 would confirm the target of 3600*. Recovery of 13-week Twiggs Momentum above zero suggests a primary up-trend. Reversal below 3200 is unlikely, but would warn of another test of primary support at 3000.

Straits Times Index

* Target calculation: 3300 + ( 3300 – 3000 ) = 3600

China’s Shanghai Composite Index signals a primary up-trend after breaking resistance at 2150/2180, but I would wait for confirmation from a follow-through above resistance at 2250. The PBOC is aggressively injecting liquidity to revive a flagging economy. It may succeed in lifting the economy in the medium-term, but is not sustainable in the long-term and could well aggravate the situation. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Breakout above 2250 would confirm a primary up-trend. Reversal below 2150 is unlikely at present, but would warn of another test of primary support at 1990/2000.

Shanghai Composite Index

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

India’s Sensex retraced to support at 25500, but is again testing resistance at 26000. Breakout would signal an advance to 27000*. Bearish divergence on 13-week Twiggs Money Flow indicates long-term selling pressure, but respect of the zero line (recovery above 10%) would suggest that buyers have taken control. Breach of 25000 is unlikely, but would warn of a correction to the primary trendline.

Sensex

* Target calculation: 21000 + ( 21000 – 15000 ) = 27000

Japan’s Nikkei 225 is retreating after a false break of resistance at 15500. Expect a test of support at 15000. Narrow consolidation normally ends in continuation of the trend; upward breakout would indicate a rally to 16000*. Declining 13-week Twiggs Money Flow, however, indicates medium-term selling pressure. Reversal below 15000 would warn of a test of primary support at 14000.

Nikkei 225

* Target calculation: 15000 + ( 15000 – 14000 ) = 16000

August 6, 2014

Europe: Dax selling pressure

Germany’s DAX is broke support at 9600, warning of a correction to 9000 — and a weakening primary up-trend. Decline of 13-week Twiggs Money Flow below zero reflects (long-term) selling pressure. Breach of primary support at 8900/9000 would signal a primary down-trend. Recovery above 9800/10000 is unlikely at present, but would indicate another advance.

DAX

* Target calculation: 9750 + ( 9750 – 9000 ) = 10500

Deutsche Post AG (y_DPW.DE) serves as a bellwether for European markets. Deutsche Post DHL couriers holds a similar position to that of Fedex in US markets. The stock broke support at 24.00/25.00, completing a rounding top. Decline of 13-week Twiggs Money Flow below zero reflects (long-term) selling pressure. Target for the breakout is 20.00*. A down-trend warns of slowing economic activity.

Deutsche Post AG

* Target calculation: 24 – ( 28 – 24 ) = 20

Dow Jones Euro Stoxx 50 is retracing to test support at 3000/3100. Breach of support would suggest a decline to 2500 as indicated on the monthly chart. Respect of support, however, would indicate another advance.

Dow Jones Euro Stoxx 50

* Target calculation: 3150 + ( 3150 – 3000 ) = 3300

A quarterly chart shows the Footsie consolidating in a long-term triangle below its previous high of 6950. Ascending triangles favor an upward breakout, but I would be cautious with the current outlook for Europe. Reversal below 6650 would warn of a correction to 6400/6500.

FTSE 100

* Target calculation: 6900 + ( 6900 – 6500 ) = 7300