GLOBAL MARKETS-Shares gain on hopes for ‘cliff’ deal; gold tumbles

* Wall Street bounces back despite Washington’s bickering * Gold breaks below 200-day moving average * IntercontinentalExchange buys NYSE Euronext for $8 billion By Angela Moon NEW YORK, Dec 20 (Reuters) – Global shares rose on Thursdayas lawmakers in Washington continued to slog on in theirnegotiations over the U.S. “fiscal cliff,” while gold pricestumbled to their lowest level since August on a burst ofyear-end selling. …
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STOCKS RALLY, GOLD TUMBLES AGAIN: Here’s What You Need To Know (DIA, SPY, QQQ, HLF, GLD)

Trader Wall Street Computer Screen Bloomberg Terminal Staring Intently Focus

Despite the lack of a fiscal cliff deal, stocks are holding up remarkably well.  Meanwhile, we got a ton of great economic data.

First the scoreboard:

Dow: 13,311, +59.7, +0.4 percent
S&P 500: 1,443, +7.8, +0.5 percent
NASDAQ: 3,050, +6.0, +0.2 percent

And now the top stories:

  • Q3 GDP was revised way up to 3.1 percent, which was much higher than the 2.8 percent economists were looking for.  Personal consumption was up 1.6 percent, versus the expectation fro 1.4 percent.
  • Weekly initial jobless claims came in line with expectations, climbing to 361k.  This was a tad higher than the 360k expected.
  • The closely followed Philly Fed Business Outlook Survey crushed expectations, surging to 8.1 from last month’s reading of -10.7.  Economists were only expecting a reading of -3.0.  This is a welcome development following  a slew of disappointing regional manufacturing surveys in recent weeks.  The idea that fiscal cliff uncertainty is stopping business activity appears to be reversing.
  • Existing home sales jumped 5.9 percent to 5.04 million in November.  This to was higher than the expectations, which were at 4.90 million. “Momentum continues to build in the housing market from growing jobs and a bursting out of household formation,” said NAR chief economist Lawrence Yun. “With lower rental vacancy rates and rising rents, combined with still historically favorable affordability conditions, more people are buying homes.”
  • Gold prices got slammed again today, falling below $1,650 per ounce.  Commodities guru Jim Rogers thinks prices could fall even further from here.  With U.S. economic data coming out bullish, there’s growing speculation that the Federal Reserve will be able to tighten monetary policy sooner than later.  Currently, the Fed expects to keep monetary policy easy through 2015.
  • Meanwhile, shares of Herbalife got pummeled again today as hedge fund giant Bill Ackman presented a devastating 342-slide presentation slamming the company. “This is a pyramid scheme,” said Ackman.
  • Don’t Miss: Wall Street’s Biggest Geniuses Reveal Their Favorite Charts Of 2012 >

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FINANCIAL ADVISOR INSIGHTS: Advisors Are Getting Flooded With Questions About Gun Stocks

FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.

Advisors Are Getting Flooded With Questions About Gun Stocks In Aftermath Of Newtown Shooting (The Wall Street Journal)

Gun stocks like Smith & Wesson’s and outdoor goods retailers like Cabela’s that also sell guns, got crushed in the immediate aftermath of the Sandy Hook massacre. Amid the outcry and the Obama administration’s plan to change gun policies, advisors expect clients will want to sell gun stocks but that it might be difficult to clear portfolios. Others however warn that this uproar about guns will die down in six months.

The Four Big Investment Themes Of 2012 (The Reformed Broker)

Investment advisor Joshua Brown says there were four major themes for investors this year. The first was the Apple obsession, but the stock’s recent downward trajectory has left investors in unfamiliar terrain. The second and the biggest winning trade was in homebuilder stocks. The third big theme was investors piling into bond funds.  And the fourth big theme was the inflows out of active funds, and into passive funds like Vanguard.

Wall Street’s Biggest Geniuses Reveal Their Favorite Charts Of 2012 (Business Insider)

As we wrap up 2012, Business Insider’s Matthew Boesler reached out to some of our favorite analysts, economists and traders to get their favorite charts of 2012. Of the 70 charts he curated Boesler said John Stolzfus and Matthew Naidorf’s gold chart was his favorite. Here is their explanation:

“Uncertainty, financial crisis, currency debasement, accommodative monetary policies, and central bank additions to gold reserves undoubtedly wheaten investors’ appetite for the ‘safe haven’ and ‘storehouse of value’ attributes of the metal. We believe, however, that ultimately it was the accessibility and liquidity provided by the ETF structure that facilitated the momentum and scope of gold’s performance. Our chart illustrates the rise of gold eight years before and eight years after the launch of SPDR Gold Shares (GLD).”

gold chart

If You’re Investing In Alcohol, Long Bourbon, Short Beer (Citi)

Per capita beer consumption has been falling and bourbon sales have surged in comparison, according to Citi’s Vivien Azer. Meanwhile, spirits also give alcohol drinkers more “buzz for their buck”.

“While we like the pockets of growth that remain in the U.S. beer category, overall we continue to believe that the U.S. spirits segment offers a more attractive return profile for investors, given the less impressive trends that we expect to continue to see for the U.S. beer category, generally. As such, our favorite name within our alcoholic beverage coverage remains Brown-Forman, where we have an $80 target price, which represents 28% ETR from current levels.”

A Baker’s Dozen – 13 Investment Themes for 2013 (Credit Suisse)

Credit Suisse analysts expect 2013, to be “disappointingly similar to 2012” but identify 13 investment themes for next year. These include healthcare reform, U.S. housing, shale revolution, and, automation.

In housing, homebuilders and building product companies will benefit from the improvement in home sales and prices. Among banks Wells Fargo will likely be the biggest beneficiary, and, mortgage REITs and insurers will also be key winners. The biggest risks to housing are  “elimination of the mortgage interest deduction and/or significantly higher FHA down payment requirements”.

Here’s How Index Funds Can Save Your Retirement (Marketwatch)

Paul Merriman, founder of Merriman LLC writes that moving money out of individual stocks and active funds, into index (passive) funds can help people retire earlier. 

Index funds add money to savings and help avoid stupid decisions. Merriman highlights ten ways in which index funds can help savings, these include reducing turnover since they rarely replace stocks and bonds, saving on taxes, and reduced risk through diversification. 

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Portfolio Manager of the OCM Gold Fund Interviews with the Wall Street Transcript: Shareholder Value Creation in Gold Mining Stocks Starts with Disciplined Capital Management

67 WALL STREET, New York – December 20, 2012 – The Wall Street Transcript has just published its Gold and Precious Metals Report offering a timely review of the sector to serious investors and industry …
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Greg Orrell, Portfolio Manager of the OCM Gold Fund Interviews with the Wall Street Transcript: Shareholder Value Creation in Gold Mining Stocks Starts with Disciplined Capital Management

67 WALL STREET, New York – December 20, 2012 – The Wall Street Transcript has just published its Gold and Precious Metals Report offering a timely review of the sector to serious investors and industry …
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WAIT: Did The Fed Just Tighten?

screw

“Did The Fed Just Tighten?”

This is the hot new question more and more people are asking.

The reason people are asking that is this: Last week, the Fed announced that it was getting rid of its guidance that it would hold rates low until 2015, and that it would instead aim for low rates until unemployment was around 6.5% or inflation expectations were around 2.5%.

The growing chatter is that we could start seeing these thresholds before 2015, particularly if the economy gets out of the liquidity trap, and returns to trend or above-trend growth, as today’s GDP report suggests is beginning to happen.

That specific question ‘Did the Fed just tighten?’ is asked by BofA/ML’s Chief Investment Strategist Michael Hartnett, in his new note on “Contrarian thoughts” for the year 2012.

He notes:

We find the change in the Fed’s “exit strategy” from its zero interest rate policy from late-2015 to an economic threshold of unemployment below 6.5% (and manageable inflation) to be very interesting. In our view, this brings into question the expectation that high liquidity is here to stay, and is perhaps a reason why gold prices have struggled this year. Also, since the Fed meeting last week, bond fund inflows have reversed. In just four days we’ve seen $2.5bn of outflows, which is on course to be the first weekly outflow in 30 weeks, and the largest outflow in 70 weeks.

This notion also helps explain some of the ongoing weakness in gold.

In a note out yesterday, Deutsche Bank’s Joe LaVorgna talked about the same thing:

As a result, if the pace of economic growth improves over the next year, the unemployment rate decline may accelerate from what has been a relatively linear drop to this point in the cycle. This is a risk to our forecast. In the following chart, we show the behavior of the unemployment rate versus a fitted time trend. The close cluster of data points around the time trend shows the relatively linear drop in the rate; in other words, the rate has declined at a relatively constant rate. If this pattern continues, we should get to a 6.5% unemployment rate by Q3 2014. However, if the economy grows in excess of 2.5% in the latter portion of next year, compared to roughly 2% at present, the unemployment rate is likely to fall a bit more quickly, possibly getting to 6.5% in early 2014.

The fact of the matter is that people are really talking about an exit right now, or at least a possibility, in a way that hasn’t been discussed for awhile. Arguably that fact represents a very modest tightening at the margins.

For more on the Fed’s big announcement, see here >

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JIM ROGERS: I’m A Gold Bull, But I Think Prices Will Tumble For A While Longer

jim rogers business insider 3 oct 2012

With gold prices being hammered in recent weeks, and trading near four-month lows on Wednesday, longtime gold bull Jim Rogers is sounding a word of caution, saying it’s possible the correction in bullion may continue into the new year.

“Just be careful, there’re too many bulls, including me, but I’m very cautious,” Rogers told CNBC. “Gold is having a correction— it’s been correcting for 15-16 months now— which is normal in my view, and it’s possible that [the] correction is going to continue for a while longer.”

Gold prices have been gaining for over 12 straight years now, Rogers noted, adding that the safe haven asset has only seen a major correction once in that time period, during the global financial crisis back in 2008 when bullion fell 32 percent.

“Most things correct 30 percent every year or two, even in big bull markets – 30 percent corrections are normal and yet gold has only done that once in the past 12 years,” Rogers said. “Gold on any kind of historic market basis is overdue for a nice correction.”

Gold regained some strength on Wednesday after falling to its lowest level since August in the previous session of $1,661.01. Analysts said the progress in U.S. “fiscal cliff” talks has dented gold’s safe haven appeal, as investors turn to equities.

Still, the precious metal, which is up around 0.3 percent so far this year, is nowhere the near the $2,000 mark many bulls had predicted it will hit by the end of this year. There were hopes the flood of cheap money unleashed by the Federal Reserve’s quantitative easing would drive gold prices higher.

(Read more: Gold to Hit $2,000 by Year-End: Merrill)

Rogers said that despite many governments around the world embarking on monetary easing and “debasing currencies” which would typically drive investors to real assets like gold, India – the largest consumer of gold globally – could pose a threat to the price if it pulls back on demand.

Earlier this year, India’s finance minister singled out gold and precious metals imports as primary drivers of the country’s current account deficit, prompting the government to respond by doubling import duty on gold.

(Read more: Why India’s Appetite for Gold Is Something to Worry About)

“India’s got a big balance of trade deficit – some Indian politicians are starting to blame it on gold,” Rogers said. “[If they] figure out a way to cut or crimp imports of gold – if something like that happens, that will be a big shock to all those bulls on gold and who knows how low it can go.”

Rogers, who is not buying gold right now and has even hedged some of his gold, said he’s still bullish on the commodity in the long term, and expects its value to be much higher in the next decade.

“If gold goes down – I hope I’m smart enough to buy more. If it goes down a lot, I hope I’m smart enough to buy a lot more,” he said.

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2012: The Year That Cried Wolf

Wolf

As we come to the end of 2012 we find that, like a movie, the stresses and strains, the thrills and spills and loose ends are all being tidied up into a relatively happy ending. However, like any blockbuster worth its salt, there are the odd questions left open ready to be picked up again in any sequel (2013). 2012 has seen the resurrection of many dark evils but TMM can’t see one that has actually resulted in the type of global disaster that many tail hedgers had placed their chips on.

The European Zombie Dawn has not torn the heart out of the EU leaving it a bloodied corpse as Greece is still in the Euro, Spain has not defaulted. The US is not in recession, China has not had a hard landing, Iran hasn’t been invaded or closed the Gulf, inflation hasn’t gone hyper through QE and, lo, we are all alive and well (if you are reading this after 21st Dec).

TMM would like to summarise 2012 as “The Year that cried Wolf”. Tail hedging became a theme that saw premiums rise rapidly, whether it was straight volatility for tails or the tail risk products such as CDS. But at the end of the year, though there was money to be made by cunning tail risk traders ( as there is with any market that is wildly moving) the underlying events that these products are designed to insure against did not occur leaving the net sellers of tail risk the beneficiaries.  TMM have had some interesting debates with friends about tail risk and we will probably do a post on it soon, but our simplistic view is that if you bet on a 33/1 horse and the price comes into 20/1 then you have made money irrelevant as to whether the horse actually wins or not. And this year saw a lot of betting on ultimate losers. 

This is probably going to be the last post of the year from us but we hope to come back strong in January with our Non-predictions for 2013 and the marking of the 2012 set. We can’t even remember what they were now and daren’t look. For now we leave you with the 2012 Christmas viewing schedule.

2012 Christmas viewing-

“The Shirakawa Briefing”– Staring Matt Damon. A tale of intrigue as one man fights to discover ancient policies shrouded in mystery since the dawn of time. Only he know’s the dark truth and is determined to warn the world of a frightening new plan being plotted by a mysterious organisation known only as the BoJ.

 “The Fiscal Cliff” prequel to “Into the Void” – Two climbers have to overcome bitter personal resentment and hatred stemming from their disturbed childhoods as political orphans in the House of Representatives in order to overcome adversity and certain death as they face the uncontrollable natural forces of budget control.
O A portfolio manager and his Sovereign CDS holdings are becalmed in the once stormy seas of the European markets when they come across a European Central Bank whose story doesn’t tally. The investor is left on a sinking ship hoping that the central bank’s plans fail and his CDS rescues him before he drowns.

“Big Trouble in Little China” – When an All-British fund manager Anthony Bolton agreed  to take his funds to the Asian stock markets, he never expected to get involved in a supernatural battle between good and evil. Bolton’s funds are rich in greenbacks, which make them a perfect target for an immortal bent system and its three invincible state structures. Suffering huge losses, how can Bolton’s funds now defeat data that can’t be seen. 

“Green Card” – A French national leaves France for tax exile in Belgium to much derision from his homeland, only to find that a benevolent Russian President is willing to give him residency with no questions asked. 

“Tom ‘n’ Rog’ll Fix it” – Far East dealers Tom ‘n’ Rog try to make their own dreams come true by fixing it for themselves. However their shady activities catch up with them years later once they think they are immune from capture leading to huge embarrassment and fines for their employer. Unfortunately, unlike the other old “fixer”, they are not already dead and are about to face prosecution for their outrageous crimes. 

“Apocalypse Not Now” – A  website in the US is inundated by true believers of the ZH cult expecting to be rescued by Aliens and long gold positions from a doom writ large in ancient calendars. However when Greece doesn’t leave the EU, Spain doesn’t default, the US doesn’t go into recession and China doesn’t have a hard landing, as the ancient prophecies predicted, they all have to pack up their meagre belongings, having sold everything else, and trudge back to the realities of a normal curve with their “tails” between their legs.

Happy Christmas and a Happy New Year from Pol, Cpmppi and Nemo.

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