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Surprise! U.S. April retail sales smashed expectations, rising the most in 13 months both on a sequential and annual basis. The MoM change came in at +1.3% on expectations of +0.8% and up from March's shabby +0.3%. Core retail sales also beat expectations coming in at +0.8% vs. +0.5% expected.

The data continues to confuse market participants because on the one hand we have a slow down in consumer spending and a rise in the personal savings rate, and on the other we have this, retail sales surging to fresh 8-year highs.

However, since mid-2015, retail stocks such as Walmart, Sears, and Home Depot haven't bought into this, diverging notably from the "fundamentals".

Hong Kong, Asia's Switzerland, is in trouble. For the first time since 2014, its GDP contracted by the most since 2011 (more than 5 yeas back). Earlier Friday, The country reported a -0.4% decline in quarterly GDP growth.

Retail spending, as reported by both the government and retailers (including payment providers like credit cards companies), has been the worst since the 2009 credit crisis and Great Recession. Averse property prices in Hong Kong have fallen more than 12% since peaking in September 2015, beckoning questions of those sky high bubble prices have finally burst. And of course, like most other South Easy Asian economies, Hong Kong has been hurt by China's slowdown and abrupt change in economic and monetary policies.

Be careful of what you wish for, if you're a venture capitalist or a rich oligarch...

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Sell In May & Play It Safe?

We are not usually pessimists but when we see the writing on the wall getting bold redder each week that passes, we can't help but to take serious note.

Just last week, we warned readers that markets might be about to get nastily volatile during the summer. So far so bad. May hasn't started well at all. The S&P 500, as of the week ending this past Friday, posted its first 3-week losing streak since January. The VIX has finally gone above 15, and the U.S. dollar index has been breaking the chain of shorts in the past 2 weeks, wiping out many bears in the process.

READ MORE:
http://www.businessoffinance.com/ins...d-play-it-safe

"Is the Fed right to say that markets have misjudged its ability to raise interest rates both higher and quicker than expected? Well, the markets say the Fed is wrong on that. The gap between the market implied FF rate and that implied by the FOMC's "dot plot" is widening. For instance, the dots say FOMC officials see on average 2 more rate hikes this year while the market only expects 1. This discrepancy only widens the farther out we go.

Also, stocks have deviated far away from GDP growth expectations, likely because the transmission that are interest rates and monetary policy have become so broken, the market refuses to trade on fundamentals and are rather technical driven.
Lastly, whatever happened in March threw the balance between yields, stocks, and macro data totally off. All 3 have been divergent since and only one will ultimately be proven correct. So which is it?"

Some charts to complement our latest piece..

Which do you believe as the judge of how good it is now? The U.S. treasury yield curve (much flatter), market-based GDP growth expectations (down a lot), or the stock market (up but unchanged from a year ago).

Whichever you pick, there are certain facts that are apparent just by looking at this chart. Yield differentials and GDP growth expectations are both steadily trending lower. Equities are in one massive range. In the past year alone, equities have partially reverted to the more "normal" levels implied by the other 2 metrics.

Because, hope.

#Forex #Stocks #Trading #Investing #Money #Economy

The sad reality of life in the 21st century — We are forced (with little choice) to work longer hour and further on into our golden years. While this infographic serves as a reference for Americans, the same can be said for most of us around the world.

The so called "retirement" age is constantly being pushed back for the average working adult. This is not because workers want to work till their death (literally and figuratively), but because they have little choice. The combination of rising costs of living (wage inflation failing to keep up with inflation of practical living prices), poor financial and strategic planning for retirement, poor investment and financial decisions, rising indebtedness, skill gaps, and the like.

It's a potent combination that has seen not only increased willingness of workers to work longer, but also governments raising their respective recommended retirement ages from the 50s, and now to the 60s. Hopefully, with advancements in life-prolonging technologies, workers are able to live longer and therefore work more years (a cyclical plot that can be likened to a conspiracy).

The charts below show just how bad the situation in the U.S. really is. 55% of working Americans polled effectively say they do not plan to retire at all.

The top 25% of income earners have retirement nests that are on average, 20 times that of what the bottom 25% of income earners have. Talk about inequality in all parts of life!

S&P 500 companies are almost done reporting for the first quarter earnings season and the results are grisly. Only 3 sectors posted positive EPS and sales growth: Consumer discretionary, telecoms, and healthcare. The rest such as utilities, materials, financials, info comm, industrials, and not to forget energy, all posted negative earnings and sales growth at varying badness.

As an index, the S&P 500 saw EPS growth of -7.1% (2 quarters in a row, officially putting it in an earnings recession), and sales growth of -1.7%. So despite lower energy prices for the most part of the first quarter, relatively subdued wage labor costs, extremely cheap import prices (thanks to a strong USD and China's deflationary exports), margins still crashed in Q1.

The what really beholds the eye is energy, which despite the bottoming out of spot crude prices, saw a whopping -107% growth in earnings over the previous quarter, and a -29% growth in sales. Sheer pandemonium! As U.S. crude production and oil rig count confines to plunge, the latter cascading to record lows, maybe it really is a case of a New Energy Paradigm (NEP), as we'd like to term it. Not cyclical bit structure, as energy analysts and strategies might agree.

And lastly, doesn't it intrigue you that S&P 500 GAAP (Generally Accepted Accounting Practices) EPS has been declining for the last 2 years whilst remaining unchanged over the last, but non-GAAP EPS has been rising for since 2009 but has just started to decline in 2015? When all else, use a different accounting standard to "cool the books".

#Forex #Stocks #Trading #Investing #Corporate #Business #Money

Some technical analysis on what was once the world's most loved, most owned, and highly capitalized company. Followed by the same analysis on the SPX. Both don't look pretty but #AAPL's price action is a complete wash. Odds are for The Fruit to continue falling until running into serious technical support coming in at $80-85. Key support was broken last Friday, but it remains to be seen if the breakdown brings follow through.

SPX price action remains in a mess. A mangled mess. Failing to break above the October 2015 highs, the index is in a formation that looks pretty similar to what we call a "head and shoulders" reversal pattern. While we do not call it that, this is what most traders can acquaint with. It is still too early to say if this formation develops successfully, but if it does, watch out and don't try catch a falling knife!

#Forex #Stocks #Trading #Investing #Tech #Business #Apple

May's Empire Fed misses huge, and is sharply down from April's print. So it seems like after 3 months of improvements, beating estimates for the last 2 months, another of the macro indicators has finally rolled over.

#Forex #Stocks #Trading #Investing #Economy #Business

We have noted the derisking trade specifically involving emerging market currencies (EMFX). Of of the worst performing of the lot has been the South African rand (ZAR), which today just posted its biggest loss against the greenback since December last year. Fresh catalysts such as political rivalry in the country has weighed heavily on the once stellar performing currency as money now is rushing for the exits.

We also leave you with a queer observation as to how the hardly heard before JPYZAR cross has historically hallmarked major turning points in the broader market with respect to huge negative developments.

#Forex #Stock #Trading #Investing #Money #Africa

Some interesting news on the bruised Fruit that is now no longer the world's most valuable publicly traded company. Moments ago, Berkshire Hathaway, the investment holding company owned by legendary value investor Warren Buffett, made public via a SEC 13F Filling, that it has purchased some 9.81 million shares of #Apple in March, at a total MTM value of approximately $0.97bn (today's valuation).

Apple shares surged 2.5% at the open of Monday's trading as a result of this disclosure, but still remains inside or a key technical balancing zone, as we've described in an earlier post this morning.

This comes after a brutal phase of the world's most profitable company, where #AAPL is down nearly 30% from its 2015 highs. Earlier in April, the Cupertino company reported its first ever decline in iPhone sales, and broadly missed analysts' expectations.

It will be interesting to see where the future takes this company which everyone is secrete rooting for deep down...

#Forex #Stocks #Trading #Investing #Money #Tech #Google #Facebook

Gold has been a gleaming asset since the start of the year, and no wonder given its stellar performance topping $1,300 just a few weeks ago. With such large increases in price, you'd expected that both big and small money to start chasing this positive momentum. You're correct.

Total ETF holdings of the yellow metal reached a 30-month last week, with gross holdings standing at 58.6mn Troy ounces, for a total market value of about $74.4bn! This is the largest increase in holdings since 2009, where the post-Lehman bull market in gold really kicked into high gear.

When the speculative bubble in gold popped in 2012, ETF holdings of gold also fell commensurately with massive and persistent liquidations plaguing both the spot and physical market. However, it seems with the genesis of the current bull run, this trend has turned

Another point to note is that commercial and speculative positioning in gold (precious metals in general) have reached what can be considered to be rather extreme levels. Momentum chasing has caused ETF gold holdings to be tightly correlated to spot prices, and retail investors flock to by shares of GLD.

We suggest one plays this carefully and not be another casualty of buying at the top...

What do rapidly falling home ownership, a divergence between single-room homes and multi-room homes, surging demand for rental in the U.S. housing market mean? Why, "rentflation", or rent inflation of course. A +8% annualized inflation in average nationwide rental prices.

We've talked about this before. It's not just Generation Y that loves to rent. More and more American residents are opting to rent instead of own. Homeownership data is depressing, but if you were a landlord, you'd be happy leading real estate to delegate young Americans looking to start their families, or immigrants looking to make a living working in the U.S..

Let's see how long more this bonanza in the rental market goes on.

Finally, some positivity in the U.S. economy. April's CPI inflation came in at +0.4% against expectations of +0.3% (this is the MoM figure). However, there was a twist to the story as we can see.

Core CPI inflation (excluding energy and food) only rose +2.1%, in line with expectations. However, core inflation has already declined for 2 straight months (March & April) since February's peak of +2.3%. Remember that the Fed often references core inflation as a more important indicator to watch than the headline inflation, and that the Fed's mandated inflation target is 2%. This means if the Fed were looking solely at core inflation, it would have already hiked rates last year.

And the twist? Higher energy prices has actually been the main, if not sole contributor to higher April inflation. Oil prices have rallied nearly 70% since their lows in February. Pump gas prices are therefore much higher than at the start of the year. This has been reflected in the CPI gasoline index which saw the largest 2-month jump since 2009!

This might not be the type of inflation or price stability Yellen is looking for to give the green light to continue raising rates!

April's U.S. industrial production rose +0.7% vs. expectations of +0.3%. But before we jump to calling this a huge beat, understand that the "beat" was actually due to March's figure being reused much lower to -0.9% from -0.6% previously, resulting in a positive print for April. Markets hardly jolted to this IP release.

What is more concerning to us however, is the fact that YoY IP has declined for the last 8 consecutive months without the U.S. economy slipping into a recession. This has never happened before — In all previous cases, the economy was always in a recession when we saw IP decline this long a time.

So that begs the golden question that we have been asking for ages. What makes this time different?

[Zoom in for ultra large image]

16 weeks. 16 unbroken weeks of straight out selling by "smart money", making this the longest ever streak on record. For the last 6 weeks we have been painstakingly documenting what this group of the so called "smart money" (made up of hedge funds, institutional clients, and private clients) have been doing with their money. They have been selling, and happily away as the broad stock market has gone just about no where in the last 4 months.

Honestly, we're sick and tired of reporting on this each week, where we'll almost certainly know next week brings the streak to 17, then to 18, and so on. You get the point. It's an incredibly stubborn trend, which although shows signs of weakening, should be not be turning anytime soon absent a huge swing in stock prices (which itself is not as likely as one might believe).

So, we leave you with BofAML's update via its weekly Client Flow Report:

"Last week, during which the S&P 500 fell 0.5%, BofAML clients were net sellers of US stocks for the 16th consecutive week—continuing the longest uninterrupted selling streak in our data history (since ’08).

Institutional and private clients were still sellers as well, but sales by these groups were both their smallest since Feb. Net sales were entirely in large caps last week, as both small and mid-caps saw net buying. Buybacks by our corporate clients decelerated last week, and month-to-date are tracking below typical May levels. Year-to-date, buybacks are tracking slightly above 2015 levels but below 2014 levels.

Net sales were led by Consumer Discretionary stocks, where misses from several retailers caused a sell-off in the sector last week. Health Care saw the next-largest outflows; this sector continues to have the longest selling streak at eleven consecutive weeks, hurt by a positioning unwind and political uncertainty in an election year Financials and Telecom stocks, plus ETFs, saw net buying last week; Telecom has the longest buying streak of any sector at three consecutive weeks (and is the only sector which has seen cumulative inflows year-to-date). Based on four-week average trends, where flows are less volatile, in addition to Telecom, Energy is now also seeing net buying after clients had sold this sector since late February.

The four-week average trend for buybacks by corporate clients suggests a bigger seasonal slowdown in buybacks than what we have seen the last few years at this time.

• Net buying: Telecom since late April

• Net selling: Tech since late Jan.; Staples since early Feb.; Industrials since mid-Feb.; Financials since late Feb; Materials and Health Care since mid-March; Consumer Discretionary since late March, Utilities since early April, ETFs since late April.

•Notable changes in trends: Energy saw a reversal to net buying after net sales since late Feb."

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Financial news, updates and articles!

We're going to let the charts to the talking this time. Volatility and the rush into VIX ETPs are too is we've previously talked about at length.
The gist of the entire issue is this: Spot implied volatility on the SPX, which these ETFs are based on, has been very low relative to historical levels. However, there has been an unprecedented demand for these long VIX ETFs, and his has been captured by the surge in shares outstanding for the most popular single and levered VIX products. This has driven the prices of VIX ETFs up, causing them to trade at extremely high premiums to NAV; again all while spot VIX (the reference asset) has barely budged above 20 for the most part of this year.
The conclusion of this story? Someone or something is really betting on a huge drop in the stock market. And when we say huge, we really mean huge!

Whether VIX ETF buyers are vindicated by a huge crash in stocks, or humiliated by vega decay and reversions back to NAV, only time will tell.
#Forex #Stocks #Trading #Investing #WTF

The global demand for cash is very real, just like we have primed follower about since the start of the year. BofAML's Global Fund Managers Survey reveals a shocking average cash allocation at about. 5.6% in April. That's near an 8-year high. Cash balances on global portfolios have been rising since 2010, as the frequency of negative shocks rise and uncertainty becomes a certainty. The adage "Cash is King" surely resonates very well here. And we understand why, and agree with this behavior.

So what are investors most concerned about in April? Well as to be expected: #Brexit, #China risks, and quantitative failure by CBs are the top 3 worries for investors. Note that the second risk has only emerged in May and wasn't present in April's survey.
Hedge wisely.
#Forex #Stocks #Trading #Investing #Economy #Psychology #Europe #EU #Trump

How much debt does China have in total? No one really knows the actual amount because everyone knows official Chinese figures cannot be completely relied on. Private estimates on the debt load of the world's second largest economy vary from the meek to the unimaginable, especially for an economy this large and connected to the world.

While China's debt burden is unmistakably gargantuan, it is what forms this debt load that makes it scarier. China has the world's most indebted corporate sector. This is a given fact. Corporate debt remains far riskier than sovereign debt as they are much more prone to credit events such as defaults and delays in payments; as opposed to the government which can, if all else fails, bail itself out!

Which leads on to the topic of bad debt, delinquencies, and non-performing loans (NPLs). Now with its economy slowing and undergoing what is purportedly a transitional phase, the Chinese corporate debt market has never been more vulnerable, in the past 6 years, to negative shocks which might cause a surge in credit events which will almost certainly cause a cascading effect on the entire credit chain.
Official figures estimate NPLs at a mere 1.7%. A far cry from private estimates anywhere from 15-21%. Pick your sides!

#Forex #Stocks #China #Trading #Investing #Debt #Economy #Corporate #Business