(MENAFN- ProactiveInvestors) U.S. Stocks Advance as Energy Rally Extends to Broader Market
Here is the opening of this report from Bloomberg: (Bloomberg) - U.S. stocks rallied for a second day rebounding from the biggest monthly drop in a year for the Standard & Poor’s 500 Index as a four-day rally in energy stocks spread to the broader market.
Corp. and Chevron Corp. climbed more than 2.6 percent as Brent crude entered a bull market. Freeport-McMoRan Inc. rose 9.1 percent as commodities had the biggest three-day advance since 2012. Office Depot Inc. jumped 22 percent after the Wall Street Journal reported the company is in advanced merger talks with Staples Inc.
The S&P 500 added 1.2 percent to 2045.13 at 3:23 p.m. in New York climbing above its average level for the past 50 days. The Dow Jones Industrial Average rose 277.24 points or 1.6 percent to 17638.28. That gauge is up 2.8 percent over two days. Trading in S&P 500 companies was 32 percent above the 30-day average.
“The fact that oil is stabilizing takes some edge off the argument that the global economy is really in trouble” Bruce Bittles chief investment strategist at Milwaukee-based RW Baird & Co. which oversees $110 billion said in a phone interview. “The markets are a little oversold after being down in January which is also part of the strength today.”
David Fuller's view
Given the US stock market’s size it remains a big influence on equity trends in other parts of the world. Consequently few investors can afford to overlook market developments on Wall Street where the technical action has been nervous since October 2014. It has also been ranging in a volatile fashion so the next sustained breakout is likely to be important – up or down.
This item continues in the Subscribers’ Area.
The Weekly View: Growth the Dollar and Earnings
My thanks to Rod Smyth Bill Ryder and Ken Liu for their excellent timing letter published by RiverFront. Here is a brief sample:
Since we expect a mild acceleration in global economic growth we expect S&P 500 earnings to rise but at a low single-digit pace. In our view the impact of the dollar will be a headwind for US companies which is one of the reasons we don’t expect valuation multiple expansion for U.S. equities in 2015. But a stronger US dollar should be a tailwind to those countries whose currencies have fallen and we expect stronger earnings growth from the companies we own in Europe and Japan.
David Fuller's view
This is a sensible comment in my opinion. Fuller Treacy Money remains long-term bullish of the US stock market. In fact we maintain that it will experience a secular bull trend which could persist for the next two decades. However higher valuations a strong US dollar and weak economic governance at the national-political level are headwinds. This is reflected by a weaker performance in 2015 to date relative to most of Asia and Europe even after the indices from these regions are valued in US Dollars. One example: India’s CNX Nifty is up +8.51% as of 3rd February versus the S&P 500 Index which is still down by -0.43% this year despite rallying during the last two days.
This item continues in the Subscribers’ Area where The Weekly View is also posted.
Obama Corporate Tax Plan Illustrates Lunacy of U.S. Code
Here is the opening of this informative Editorial from Bloomberg: (Bloomberg View) - In his latest attempt to find the money to repair the U.S.'s decrepit roads and bridges President Barack Obama is proposing to raid the overseas bank accounts of corporate America. Inevitably because it involves the U.S. tax code the plan is not without its absurd aspects. But it could point the way toward making tax policy more sensible.
Obama's budget proposes to tax the roughly $2 trillion in earnings that U.S. businesses are holding overseas at a one-time rate of 14 percent and to direct the resulting revenue toward public-works projects. The tax rate for new overseas earnings would then be set at 19 percent 16 percentage points below the current top rate for domestic earnings regardless of whether companies bring the money back to the U.S.
This isn't the worst such plan. It would discourage companies from continuing to stash their cash abroad in the hope that Congress will eventually give them another "tax holiday."
And infrastructure investment is a prudent way to spend the one- time revenue boon. Plus it would shore up bridges and rail lines that in some cases are in dangerously poor shape.
The plan's second component meanwhile acknowledges the deeper problem that leads businesses to this strange situation in the first place. Unlike most industrialized countries which tax only domestic earnings the U.S. compels companies to pay taxes on their worldwide earnings. They receive credits for taxes paid to foreign governments and can defer what they owe on overseas income until the money is brought back into the U.S.
This has a number of distortive effects. Most obviously it discourages companies from bringing money home to pay dividends or make new investments. It also encourages them to take on debt leads to burdensome compliance costs and outlandish legal trickery and makes U.S. businesses less competitive in foreign markets.
Obama's plan to tax new foreign earnings at a reduced rate implicitly recognizes the foolishness of this system. Yet it fails to follow this insight to its logical conclusion: Abolish most taxes on overseas earnings altogether.
David Fuller's view
All this makes sense to me. Governance Is Everything as I never tire of saying. US tax policies remain a problem for corporations and GDP growth.
The Markets Now
Monday 23rd February at the East India Club 16 St. James Square London SW1Y 4LH
David Fuller's view
If you live near London and attend our next seminar on 23rd February you will meet another subscriber David Brown who has attended Markets Now and will return next month as our guest speaker. He is a fascinating visionary and accomplished individual whose subject will be The Third Industrial Revolution.
You will find the speakers’ short bios in the latest brochure and if Bruce Albrecht can join us once again in London he will also participate. Delegates will be limited to 35 so I would not delay if you are interested in this event. At approximately 8:30pm following the presentations speakers and many delegates adjourn to the East India Club’s American Bar for refreshments and further conversation. I hope you can stay on and join us if you have the time.
I cannot think of a more interesting time in the markets to be holding this Seminar – come along to listen enjoy and participate.
Euro Rallies to Two-Week High as Greece Softens Stance on Debt
This article by Andrea Wong for Bloomberg may be of interest to subscribers. Here is a section:
The euro rose to the strongest level in almost two weeks as Greece’s government was said to retreat from a demand for a debt writedown boosting optimism the region won’t face a renewed crisis.
Australia’s dollar tumbled to the weakest level since May 2009 after the Reserve Bank of Australia joined a growing number of central banks that are boosting monetary stimulus to address slowing economic growth and inflation. Denmark’s central bank sold a record amount of kroner last month to protect its peg to the shared currency while Russia’s ruble gained.
“The tone of the political comments from both the Greek and euro-area leaders has become a bit more agreeable and less confrontational” Nick Bennenbroek head of currency strategy at Wells Fargo & Co. said in a phone interview from New York. “Partly this is a market-driven technically inspired move.”
The 19-nation euro gained 1.1 percent to $1.1470 at 12:05 p.m. New York time after slumping last month to the weakest level since 2003. The currency added 1.1 percent to 134.58 yen.
The euro advanced versus most of its major peers after Greece’s Finance Minister Yanis Varoufakis outlined plans to swap some Greek debt owned by the European Central Bank and the European Financial Stability Facility for new securities according to a person who attended the meeting and asked not to be identified because they weren’t authorized to speak publicly.
Eoin Treacy's view
The rebound in oil prices following a steep decline has resulted in short sellers coming under pressure. One of the other big short traders has been to bet against the Euro over the last month as it sank 15¢ since late December. These are big markets and a large move in one may inspire traders in another to introduce stops. At least some short positions were closed and/or reversed in the Euro over the last two days suggesting at least a partial mean reversion rally is underway.
Eoin personal portfolio: in-the-money stop introduced on a commodity position and two new currency positions opened
Eoin Treacy's view
Details of these trades are contained in the Subscriber's Area.
Indian e-Commerce
Thanks to a subscriber for this topical report from Deutsche Bank which may be of interest. Here is a section:
India in a nutshell: India is a large emerging market in terms of population and formal retail is still underpenetrated. E-Commerce spend today is mostly in online travel and future growth of B2C e-tail (physical goods) is likely to be driven by large well-funded competitors who can speed up online adoption. The key risk is how quickly profitability arrives given the size of the market the intensity of competition and consumer behavior. Market estimates1 put the current and future size of the Indian e-commerce market at only 3% to 7% of Chinese levels with significant upside through consumer adoption.
Formal retail under-penetrated in India: Market estimates2 put the size of the Indian retail market at cUS$350bn but formal retail at only 5% of that total.
E-commerce nascent but growing: Market estimates3 look for the overall ecommerce market to grow from US$22bn in 2014 to US$86bn in 2018 (40% CAGR). Within just B2C e-tail estimates are for expansion from cUS$4bn in 2014 to cUS$18bn by 2018 (45% CAGR).
E-commerce to target the wealthier demographics: c60m households (c25% of the overall population) in India control c60% of retail spend in 2015E; these households are forecast to double in absolute numbers by 2025 with spending power to triple over the same period. Wealth concentration and limited broadband penetration (c11%) could potentially create a two-tier market: 1) wealthy cohorts where online spend centers on consumer discretionary items (electronics clothes etc) and where the longer-term opportunity is in migrating their online spend to include consumer staples (diapers consumables food) and 2) the mass-market where spend levels are likely to be lower but increasing mobile penetration a lack of formal retail/alternatives and sheer numbers could prove formidable over time.
Low internet penetration but high growth: Less than 20% of the population had internet access in 2013 (214m) but this figure looks set to grow to c500m by 2018 (c36%) driven by mobile internet penetration leapfrogging desktop5
Market cap per internet user is low: In Western markets the market cap for the e-commerce sector on a per internet user basis is nearly 15x that of India. The ratio is nearly as stretched even when compared with similar emerging markets such as APAC where the e-commerce market cap on a per user basis is nearly 10x that of India. This indicates the huge opportunity left for ecommerce penetration and growth in India. As discussed India has over 200m internet users but less than 10% of those users purchase online. In the next few years (and decades) more retail spend is likely to shift online closing the gap with its global peers.
Eoin Treacy's view
A link to the full report is posted in the Subscriber's Area.
As China’s e-tail companies make large public splashes in the international markets the question of where India’s online champions are is a relevant one. The country has a similar population size to China but its infrastructure and openness to foreign investment and joint ventures lags far behind its neighbour. Nevertheless as broadband access improves smartphone penetration increases and online banking spreads the potential for online retailing to take off just as it has elsewhere is high.
MakerBot 3D printer used to create tracheal cartilage
This article by Chris Wood for Gizmag may be of interest to subscribers. Here is a section:
Printing a 2-inch (5 cm) long section of windpipe takes less than two hours after which it needs to be placed in a bioreactor which acts like a rotisserie – keeping the cells at optimum temperature while allowing them to grow evenly.
In order to avoid the high cost of purchasing a new bioreactor (between US$50000 and $150000) Goldstein once again resorted to 3D printing using the MakerBot printer to make gears and other parts converting an incubator to suit the needs of the project.
The results of the research are promising with Goldstein stating that "The cells survived the 3D printing process were able to continue dividing and produced the extracellular matrix expected of tracheal chrondrocytes."
While further study is required before the research can be put into practice it has the potential to change the face of tracheal surgery. The impact will be particularly significant for pediatric applications as the graft’s biological nature allows the patient to grow removing existing limitation in regard to the physical length of reconstruction. Additionally the method can also be used to create a branching bioprosthesis making it viable for surgery on the tracheal carina and bronchi.
Eoin Treacy's view
The 3-D printing industry is a prime example of how technological innovation is accelerating at a prodigious rate and yet investors need to be cautious about how they participate.
The Makerbot machine used in the above experiment costs $2000. When I first started writing about 3-D printers nearly five years ago the cost of a similar sized machine was closer to $100000 and it would not have had the same ability to customise the output. The speed with which this sector has grown is mind boggling. The results of rapid prototyping such as that detailed above have the capacity to improve services offered by the medical sector in particular beyond recognition.
The Chart Seminar 2015
Eoin Treacy's view
Following a productive collaboration last year we have agreed to co-host another Chart Seminar with the CFA Institute in Singapore. This will be on April 16th and 17th at the M Hotel on 81 Anson Road.
This year we only intend to hold one seminar in the UK so please let us know whether you would prefer a May or November schedule. Additionally if you are interested in attending a seminar in either Australia or the USA this year please let us know. If we have critical mass we would be happy to arrange one.
To book your place or express interest please contact Sarah Barnes at sarah@fullertreacymoney.com
The full rate for The Chart Seminar is £950 + VAT. (Please note US Australian and Asian delegates as non EU residents are not liable for VAT). The early booking rate of £875 for non-subscribers expires two months ahead of the event start date. Subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.
Private Seminars and Partnering Opportunities
We are also available to conduct private seminars and occasionally agree to speaking engagements at investment conferences and professional societies.
Email of the day on the Singapore Chart Seminar
I plan to attend the Singapore seminar. When will the details be finalized Kind regards
Eoin Treacy's view
Thank you for your interest in the Singapore venue for The Chart Seminar to be held on April 16th and 17th. We confirmed the venue with M Hotels yesterday and I look forward to seeing you there. I also look forward to hearing your impressions from your home market in Japan.
Speaking Engagements 2015
Eoin Treacy's view
The Global Corporate Autonomies Fund will be launching in March and I will be in London on the week of February 9th to meet with prospective investors and to give a talk “The Big Picture and the Autonomies” at the East India Club from 6:30pm on February 10th. If you would like to attend or have any questions please contact Chris Moore at chris@wmcapitalmanagement.com. Here also is a link to yesterday’s piece on the Autonomies and here is a link to the fund brochure.
I have also accepted an invitation to speak at the annual MTA Symposium in New York on March 26th and 27th. The topic of my talk will be Quality Trends: Bet on quality and monitor consistency
Eoin Treacy's view
FullerTreacyMoney set up a feed in December but I didn’t start updating it until yesterday. In the era of social media many people tend to look more at their accounts than free daily emails so we will post content both on our website and via .
Additionally I will post interesting charts on a daily basis when I have completed by morning click though of markets. Today I posted charts of the historical oil price Canadian Dollar Singapore Dollar / Swiss France cross rate Check Point Software and Veolia.
Please feel free to follow us on at https://.com/FullerTreacy We would also be happy to follow the account of any of our subscribers who follow us.