Good News: It's Almost Over After Pelosi Says Congress Looking At "Two-Tiered" Deal
With 23 hours left until the Asian open (or,
more importantly, 19 hours until FX trading resumes) and with today's
round of talks now official over after a one hour meeting in Boehner's
office with congressional leaders achieved nothing, it is becoming clear
that the final debt ceiling outcome will be "no change" in spending or
taxing habits and a temporary hike in the debt ceiling, so that the soap
opera can be repeated again every three months... and again... and
again... and so forth for an "extended period of time" as "transitory
solutions' become the new grand consensus. At least we now know
the phrase for complete, impotent incompetence in the Hill is: "Two
tiered approach" which is how Nancy Pelosi called the last minute
attempt at compromise. Per The Hill: "House Minority Leader Nancy Pelosi
(D-Calif.) said Saturday night that congressional leaders are
considering a two-tiered approach to raising the debt ceiling and
reducing the nation’s long-term budget deficit. Pelosi reiterated that
she backs “a long-term extension” of the $14.3 trillion debt limit,
putting her in line with the demands of President Obama and Senate
Majority Leader Harry Reid (D-Nev.)." Alas this now appears to be a
mirage: at best the Republicans will agree to a $200-300 billion
extension to get the Treasury through for another 2 months (although at
the delayed run rate, Geithner needs to issue $350 billion in debt right
now just to catch up with where bond issuance should be). And then
again until the general public gets so tired of this charade that they
vote Obama out. Or so the republicans think. Or who the hell knows what
they think. Or anyone else for that matter. It does appear however, that
unless there is a definitive and consensual proposal on the table by 4
pm tomorrow when FX opens, the market will no longer be able to ignore
what is happening in DC. Which brings us to the best news of the day:
this whole farcical spectacle is almost over.
Two for the price of zero: first, we present David Kostin's weekly chartology, which once again focuses on the only good thing to discuss these days: US corporate earnings which have now seen 45% of companies report (note: not European ones which as we pointed out on Friday have been abysmal so far). Here, among other things we learn that Apple now accounts for 40% ($0.23/share) of the $0.57 aggregate in EPS surprise beat for the S&P 500. Said otherwise, and the cumulative trailing "beat" for all the remaining companies in the S&P would have been 40% lower. In summary: "Three key numbers: 18% year/year EPS growth, 13% revenue growth, and 64 bp of margin expansion" Another notable observation which is in line with our prediction from mid May that staples will outperform discretionary: "Market participants will be surprised to learn that Consumer Staples growth is stronger than Consumer Discretionary growth for both sales (8% vs. 4%) and earnings (7% vs. 5%). Philip Morris International (PM) is a key contributor to growth in Consumer Staples. Actual results together with consensus expectations indicate slight margin declines in Telecom Services and Consumer Staples relative to 2Q 2010." Some may indeed be surprised, others not so much. Lastly, Kostin still sees 1450 on the S&P by the year end despite Hatzius' cut to estimates last week. Second, also included is last week's key event summary.
Jim Rogers: Fed Will Launch QE3 by Q3
Just a couple of quick observations on how the market is now pretty much "all Apple." Using David Kostin's previously published data, the first chart below shows that Apple alone accounts for a substantial portion of the best margin performing group in the S&P: Information Technology. Indeed, as the second chart shows while most sectors have been cutting their margin forecasts for H2, with a particular emphasis on materials, healthcare and industrials, one sector has been doing surprisingly well: InfoTech. And of this, Apple is the dominant margin leader. As Kostin says, "AAPL was a key contributor to the market’s continued margin expansion." Take away this cult company and the entire market's forecasted margin improvement collapses. Furthermore, as was pointed out previously, and confirming just how massive Apple's role is in the S&P earnings picture, is the fact that Apple (AAPL) which posted revenues $3.9 billion (16%) above expectations and single-handedly contributed a stunning 40% ($0.23) of the $0.57 per share of aggregate EPS surprise for the S&P 500. Upward revisions to AAPL’s 2H sales and earnings expectations contributed much of the Technology sector’s positive revisions." Lastly, "AAPL currently represents 3.2% of S&P 500 EPS for 2Q 2011." Woe to the market if anyone manages to disturb the precious market ecosystem which now relies exclusively on Apple to be the dominant power pushing and pulling everyone else higher. And as more and more market making power is delegated to the cult, what happens when one day, inevitably, Apple disappoints?
One last quick comparable chart indicating the unique position of Apple in the stock market: with $76.2 billion in Cash, Short and Long-Term Investments, AAPL has more money in the bank than 38.9% of all S&P 500 (ex financials) companies, combined, or 163 companies in total. These are the companies with the least cash, ST and LT investments, starting at the bottom and going up until one gets to a cumulative number just under that of Apple. And here's the kicker. These same 163 companies have a cumulative of $412 billion in debt against their $76.1 billion in cash. Apple's total debt? $0.00.
In a gold lovefest, shades of 1980
The worse things get, the better it looks for gold. That's been the pattern this summer.
July 23, 2011, at 1:59 pm
by Dan Norcini in the category King World News, Trader Dan Norcini |
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by Dan Norcini in the category King World News, Trader Dan Norcini |
Print This Post | Email This Post
Dear CIGAs,
Please click the link below to listen to this week’s metals wrap up from King World News, featuring our very own Trader Dan Norcini.
Click here to listen to the weekly metals wrap up…
I want to make a brief clarification of a comment I made in regards to "limits" on the Commitment of Traders report that might be misconstrued. When I said that there are no limits in regards to "how many specs can come into a market", I did not mean to imply that there are NO POSITION LIMITS in the precious metals. There are of course position limits that apply to speculators. What I want to emphasize is that there are indeed no limits as to how many specs can decide to come into the gold market. The exchanges in conjunction with the CFTC do not publish a rule stating something to the effect, "Oh, we see that there are now 75,000 different speculative accounts on the long side in gold. That’s it – shut the barn door and don’t let anyone else in".
This is the reason that we cannot look at a build in open interest and dogmatically state that the market will now top out because the speculative net long position has reached such and such levels. All bull markets are marked by INCREASING open interest and along with that, an increase in the number of specs on the long side of that market. The reason is very simple – it takes financial firepower to drive a market higher and that requires a steady stream of buying. Absent this buying, the force of gravity takes over and markets fall lower.
Another way of saying this is that in order to keep markets levitated, thrust or force must be continuously applied. Absent this force, the path of least resistance is downward as gravity takes over. Speculative buying is the force that therefore drives a market higher. The higher a market runs then, the more speculative buying that accompanies that move higher. A bull market that makes new all time highs, should see the size of the speculative long category making new all time highs as well. This is normal and healthy. Whenever you see a market moving higher and the speculative long side exposure DECREASING, beware; the move higher is being driven not by new buying but by trapped shorts who are BUYING back existing short positions or short covering. Once they are done getting out, the market will then collapse because there are no NEW SPECULATIVE BUYERS around to keep applying upward force against gravity.
The thing we do watch with the COT report however is the size of large spec long side levels, AND whether or not the market continues to move higher or whether it stalls out and then drops through a technically significant support level on the price charts. If that occurs, the nature of the markets is that the computer algorithms will generate sell orders among the spec long holders. That is what the bears are always counting on – a rash of sell orders coming from sell stops located below the market which then feed a frenzy of additional selling as the computers take over. The larger the build in the speculative long side exposure, the more POTENTIAL there can be for a sharp move lower as their long positions are flushed out.
Incidentally, the Asians love these spec flushes as they pounce on the markets at lower levels to accumulate more at a better price.
The key for the gold market is whether or not it can continue to attract fresh buying from both existing long holders are who below the position limit threshold and from those who are just coming into the gold market having no previous long positions. As long as you get fresh money inflows, the market can move higher, regardless of the current size of the speculative net long position.
Regards,
Trader Dan
Please click the link below to listen to this week’s metals wrap up from King World News, featuring our very own Trader Dan Norcini.
Click here to listen to the weekly metals wrap up…
I want to make a brief clarification of a comment I made in regards to "limits" on the Commitment of Traders report that might be misconstrued. When I said that there are no limits in regards to "how many specs can come into a market", I did not mean to imply that there are NO POSITION LIMITS in the precious metals. There are of course position limits that apply to speculators. What I want to emphasize is that there are indeed no limits as to how many specs can decide to come into the gold market. The exchanges in conjunction with the CFTC do not publish a rule stating something to the effect, "Oh, we see that there are now 75,000 different speculative accounts on the long side in gold. That’s it – shut the barn door and don’t let anyone else in".
This is the reason that we cannot look at a build in open interest and dogmatically state that the market will now top out because the speculative net long position has reached such and such levels. All bull markets are marked by INCREASING open interest and along with that, an increase in the number of specs on the long side of that market. The reason is very simple – it takes financial firepower to drive a market higher and that requires a steady stream of buying. Absent this buying, the force of gravity takes over and markets fall lower.
Another way of saying this is that in order to keep markets levitated, thrust or force must be continuously applied. Absent this force, the path of least resistance is downward as gravity takes over. Speculative buying is the force that therefore drives a market higher. The higher a market runs then, the more speculative buying that accompanies that move higher. A bull market that makes new all time highs, should see the size of the speculative long category making new all time highs as well. This is normal and healthy. Whenever you see a market moving higher and the speculative long side exposure DECREASING, beware; the move higher is being driven not by new buying but by trapped shorts who are BUYING back existing short positions or short covering. Once they are done getting out, the market will then collapse because there are no NEW SPECULATIVE BUYERS around to keep applying upward force against gravity.
The thing we do watch with the COT report however is the size of large spec long side levels, AND whether or not the market continues to move higher or whether it stalls out and then drops through a technically significant support level on the price charts. If that occurs, the nature of the markets is that the computer algorithms will generate sell orders among the spec long holders. That is what the bears are always counting on – a rash of sell orders coming from sell stops located below the market which then feed a frenzy of additional selling as the computers take over. The larger the build in the speculative long side exposure, the more POTENTIAL there can be for a sharp move lower as their long positions are flushed out.
Incidentally, the Asians love these spec flushes as they pounce on the markets at lower levels to accumulate more at a better price.
The key for the gold market is whether or not it can continue to attract fresh buying from both existing long holders are who below the position limit threshold and from those who are just coming into the gold market having no previous long positions. As long as you get fresh money inflows, the market can move higher, regardless of the current size of the speculative net long position.
Regards,
Trader Dan
Weekly Chartology And Key Event Summary
Two for the price of zero: first, we present David Kostin's weekly chartology, which once again focuses on the only good thing to discuss these days: US corporate earnings which have now seen 45% of companies report (note: not European ones which as we pointed out on Friday have been abysmal so far). Here, among other things we learn that Apple now accounts for 40% ($0.23/share) of the $0.57 aggregate in EPS surprise beat for the S&P 500. Said otherwise, and the cumulative trailing "beat" for all the remaining companies in the S&P would have been 40% lower. In summary: "Three key numbers: 18% year/year EPS growth, 13% revenue growth, and 64 bp of margin expansion" Another notable observation which is in line with our prediction from mid May that staples will outperform discretionary: "Market participants will be surprised to learn that Consumer Staples growth is stronger than Consumer Discretionary growth for both sales (8% vs. 4%) and earnings (7% vs. 5%). Philip Morris International (PM) is a key contributor to growth in Consumer Staples. Actual results together with consensus expectations indicate slight margin declines in Telecom Services and Consumer Staples relative to 2Q 2010." Some may indeed be surprised, others not so much. Lastly, Kostin still sees 1450 on the S&P by the year end despite Hatzius' cut to estimates last week. Second, also included is last week's key event summary.
Jim Rogers: Fed Will Launch QE3 by Q3
Get Ready For a 70% Marginal Tax Rate
Moody's Warns Could Cut Five States Tied to US Credit
The Collapse of Paper Money and the Vertical Move of Gold
Gary North: The US Debt Ceiling Show Baloney
Sales of Existing US Homes Fall, Partly Due to Cancellations
Moody's Warns Could Cut Five States Tied to US Credit
The Collapse of Paper Money and the Vertical Move of Gold
Gary North: The US Debt Ceiling Show Baloney
Sales of Existing US Homes Fall, Partly Due to Cancellations
Mass Killer Andrew Berwick's, aka Anders Breivik, Complete 777,724 Word Manifesto
We won't even pretend we have come anywehere
close to reading this, or have any interest in doing so. For anyone who
does not share our lack of interest in what a diseased mind can drone
about for 777,724 words, or 1,516 pages, knock yourself out.
Some Quick Facts About Apple Massive Market Footprint
Just a couple of quick observations on how the market is now pretty much "all Apple." Using David Kostin's previously published data, the first chart below shows that Apple alone accounts for a substantial portion of the best margin performing group in the S&P: Information Technology. Indeed, as the second chart shows while most sectors have been cutting their margin forecasts for H2, with a particular emphasis on materials, healthcare and industrials, one sector has been doing surprisingly well: InfoTech. And of this, Apple is the dominant margin leader. As Kostin says, "AAPL was a key contributor to the market’s continued margin expansion." Take away this cult company and the entire market's forecasted margin improvement collapses. Furthermore, as was pointed out previously, and confirming just how massive Apple's role is in the S&P earnings picture, is the fact that Apple (AAPL) which posted revenues $3.9 billion (16%) above expectations and single-handedly contributed a stunning 40% ($0.23) of the $0.57 per share of aggregate EPS surprise for the S&P 500. Upward revisions to AAPL’s 2H sales and earnings expectations contributed much of the Technology sector’s positive revisions." Lastly, "AAPL currently represents 3.2% of S&P 500 EPS for 2Q 2011." Woe to the market if anyone manages to disturb the precious market ecosystem which now relies exclusively on Apple to be the dominant power pushing and pulling everyone else higher. And as more and more market making power is delegated to the cult, what happens when one day, inevitably, Apple disappoints?
Apple Has More Cash Than 38.9% Of The Companies In The S&P Combined (And $413 Billion Less Debt)
One last quick comparable chart indicating the unique position of Apple in the stock market: with $76.2 billion in Cash, Short and Long-Term Investments, AAPL has more money in the bank than 38.9% of all S&P 500 (ex financials) companies, combined, or 163 companies in total. These are the companies with the least cash, ST and LT investments, starting at the bottom and going up until one gets to a cumulative number just under that of Apple. And here's the kicker. These same 163 companies have a cumulative of $412 billion in debt against their $76.1 billion in cash. Apple's total debt? $0.00.
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/silver/t24_ag_en_usoz_2.gif)
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