Beward the ides of March
The chase by Frances Horodelski:
3.
What happened? We were just beginning to enjoy this new high thing and wham, they took it away. Why? According to one investment letter writer "take your pick". Ukraine/Russia (with the FT noting that "some over-leveraged oligarchs are already facing margin calls"); China - slowing economic, credit crunch, pollution, default potential; next week's Fed worries that there will be a change in language to include even only an oblique reference to tightening someway somehow soon, a shift from letting the balance sheet "run off" (i.e. mature) to actually selling some of the trillions in government bonds they currently hold; the reversal in the bond market (a ten basis point reversal in the 10-year from 2.75% to close at 2.64% - nicely in the face of Goldman Sachs' bond sell call!); a reversal in the euro (as Mario Draghi took his "whatever it takes" stance in a different direction from saving the euro to staving off deflation).
From Zack's: "The real story is that stocks rallied virtually nonstop for a month making new all-time highs this week at 1882. The natural response to such fast paced action is to consolidate or pullback for a little while. The previous high at 1848 would seem to be a spot of good support. And if that fails, then hard to imagine a move lower than 1800." The S&P 500 is down 1.7% from its highs.
Looking for the next Netflix? As reported by Valuewalk, Whitney Tilson, value manager and founder of Case Capital Management, is focusing on MagicJack (CALL) a company that provides low cost long distance and long telephone services that he says is like buying NFLX at $54.44 (where he made his purchase of the streaming entertainment company). Interesting.
While it feels treacherous out there, the news flow is quiet. Our chase list includes items emerging market related, a sum up of the consumer post the retailing quarterly results period which are winding down (and yesterday's better than expected February retail sales), waiting forCarnival Corp. (the cruise line operator), General Mills (released a 2014 outlook with the third quarter now expected at 61-62 cents versus the Street's 68 cent estimate as U.S. retail operating profit is estimated to be down 10-11%; Q4 is expected to show double-digit growth but the full year's $2.87-$2.90 is at the low end of the current range of estimates). Currency, grain costs and restructuring are cited as issues. On the economic front, U.S. wholesale inflation data is released at 8:30 and a first look at March confidence with the University of Michigan index out at 9:55 am ET (82 is estimated - a level near the high end of the recent range).
The lineup today includes a number of CEOs (Enerplus, Lightstream Resources, Cameco, BioAmber) as well as Canada's Ambassador to the U.S., Gary Doer. We also have an interesting interview on a Moody's report on activism (white hat or black menace?).
For the gold bulls, many technicians are on your side. There is a death cross in the relative relationship between oil and bullion in gold's favour; TSX gold stocks have put in a golden cross; bullion has put in a golden cross; and today, Bloomberg reports that a director at Dublin's GoldCore (a gold bullion investment manager) says that in December, gold relative to equities was the cheapest in five years (2.94x the MSCI All-Country World Index). He sees this particular ratio rising from the current 3.36 to above 6 in the next few years (of course, with ratios, always remember it isn't always just become one component goes up, it could be that the other just goes down). If we want to get deep into the weeds of the squiggly lines, Coremark notes that the Fibonacci retracement values for gold are $1354 (23.6%), $1462 (38%). A true break of the downtrend would require $1637 (61.8%) - "a tall order" given the breakdown.
For those who notice my mistakes - thank you. The other day I mentioned the Kaliningrad Oblast, a part of Russia that isn't continguous with Russia but is on the Baltic Sea beside Lithuania. It is not attached to Germany at all but on the other side of Poland.
Finally, I don't know about you, but almost every day, I'm looking at headlines that talk about the manipulation of something (Libor, Hibor, gold fixing, currencies). Today, this fixing-thing has come to Canada with a Bloomberg investigation showing that the Bank of Canada is examining the way its own currency benchmarks, including the noon rate for the Canadian dollar can result in possible "collusion between dealers" and leave FX markets "open to manipulation". Another thing to worry about!
Homework time - read prospectuses on GE's consumer finance unit (apparently reads like a novel) and Virtu Financial (the first high frequency trading firm to come to market that, apparently, represents 5% of all U.S. equity volume and a has had only one trading day of losses in four years of trading.)
Have a great weekend but beware the ides of March.
Francis H
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