On Friday, 3/22/13,
the Nikkei
plummets -2.5%. The Cyprus finance minister returns from Moscow empty-handed. Russia
is out of the talks until the Troika makes a decision. Merkel is very unhappy with Cyprus delaying talks with the Troika
(EU, IMF and ECB). News occurs that Cyprus
Popular Bank will close and reorganize. Hundreds of protestors and bank
employees take to the streets in front of the bank and clash with police. Cyprus parliament is in session trying
to find a solution to the crisis. S&P rating agency downgrades Cyprus debt. France business confidence drops. The U.K.’s
Mulberry (high-end bags) announces disappointing sales and lowers guidance
moving forward (the wealthy consumers are not spending). Contagion across Europe from the Cyprus crisis is tame and contained so
far since Italy and Spain bond yields are maintaining a flat posture. The German 10-year yield is down to 1.35%, a
level not seen in about one year, so traders are definitely seeking safety.
The euro/dollar sits at 1.29. Cyprus needs
5.8 billion dollars within three days time; the clock is ticking. The tax
on Cyprus depositors will likely occur changing the face of global banking
forever, and, of course Russia will
find a way to retaliate. German business confidence misses estimates. Italy
continues to try and form a government. The broad indexes open and
jump higher. The remainder of the day the SPX
moves through the 1553-1556 range, bumping up and down depending on Cyprus
rumors. At 12:30 PM, the 8 MA moves up through the 34 MA on the SPX 30-minute chart signaling
bullish markets for the hours and days ahead. Fitch rating agency places the U.K. on negative review.
The SPX closes at 1557 flat on the week.
The Dow was also flat this week closing at
14512 but the Dow prints a new intraday all-time
high at 14547. The Nasdaq (tech) and RUT (small caps), the
market leaders, are negative on the week. The markets do not sell off since traders optimistically expect a solution
to the Cyprus situation and, after the closing bell, Cyprus votes to approve capital controls
on banks which opens the door to receive a bailout. The smaller Cyprus bank depositors (under
100,000 euro’s) will be protected but the wealthier depositors will have their
funds confiscated, perhaps as much as fifty-percent or more. The Russians, making up the bulk of the
wealthier depositors, will likely seek retaliation. The capital
controls are needed since bank runs will occur come Tuesday morning and
restrictions are needed to limit the amount of funds that can be pulled.
Moody’s rating agency downgrades three Cyprus banks
one notch based on the pending depositor confiscations and serious problems in
the banking sector. Traders involved in the JPM London whale trading
debacle are under investigation and charges may follow.
On Saturday, 3/23/13,
the Senate
finally approves a budget after four years without one. Cyprus leaders are currently meeting with the Troika
(EU, IMF, ECB). Cyprus retailers and other businesses are hurting due to
the lack of cash with banks closed for one week. Eurozone
finance ministers are meeting tomorrow and the Cyprus parliament wants to wait
until this meeting ends before they convene. Cyprus
must set the levels and conditions and approve the money confiscation from the
wealthy depositors before Monday to avoid a meltdown which would cause Cyprus to exit the euro. Things are on
track to approve the confiscation of the wealthy depositor’s money but the
worry remains over bank runs.
----------------------------------------------------------------
On Sunday, 3/24/13, Palm Sunday. Russian tycoon Boris Berezovsky is found dead
in the U.K. due to suspicious circumstances. The majority of Cyprus citizens want to exit
the euro. Eurozone finance ministers meet followed by
the Cyprus parliament. At 7 PM EST, word of an initial agreement occurs and
futures jump higher. At 9 PM, the Cyprus bailout terms are announced. The solution
was expected since politicians and
central bankers will always kick the can and wall paper over problems.
Interestingly, the futures are not as
high as would be expected; the S&P’s up only about six handles when 10
to 30 handles are typical when each of these bailout events occur.
On Monday, 3/25/13,
Cyprus drama continues
with equity markets trading higher.
S&P futures are up eight. The euro is over 1.30. Traders remain happy due to the Cyprus
bailout, or rather ‘bail-in’, as some are calling it (since the depositor money
was confiscated to help resolve the situation). Protestors take to the streets
in Cyprus. Bank employees know that the majority of them will lose their jobs. In Italy, Berlesconi is pushing for new elections. In the northern U.S. a major spring snow
storm creates a slow start to the week. At the opening bell, the markets jump higher, the SPX stops
within pennies of the all-time closing high at 1565.15, reversing on news from the Dutch
finance minister that says Cyprus can serve as a ‘template for the rest of
Europe. The broad indexes plummet. Italian and Spanish, as well as U.S. banks,
are sold off hard. Obviously, if you have your money in an Italy, Spain,
or Portugal bank, or any bank for that matter, you are on notice that your
money can be confiscated just like Cyprus.
The 8
MA stabs down through the 34 MA on the SPX 30-minute chart signaling bearish
markets for the hours and days ahead.
The euro
falls down through 1.30, then 1.29. Copper weakens further. Volatility jumps higher. The 10-year
yield drops to 1.92%. The Fed’s Dudley
speaks dovishly but the markets do not bounce. Chairman Bernanke speaks at 1:15
PM but his comments are not market moving.
The Dutch finance minister retracts his statement about
Cyprus as a template but the genie is out of the bottle. Markets
bounce on his retraction but barely recover half of the drop today. Everyone knows that the world has changed; your money is never truly safe in a bank
ever again. Markets skid out
sideways to end the session. Cyprus planned
to open the banks tomorrow but announces that all banks will be closed until
Thursday, placing the bank holiday at near two weeks time. When
banks open Thursday, capital controls will only allow 100 euro withdrawals (about
$130 per day). Obviously, a prudent investing plan moving forward should
include a small fireproof safe, hidden in your home, where you can tuck away a
few dollars each pay day month after month, building a cash reserve. That way,
if future bank holiday’s occur, which is likely, you will be protected from
having to stand in line all day to receive one hundred bucks, and then show up the next day to do
the same. Fed’s
Fisher says he expects a 3% growth rate by the end of the year.
On Tuesday, 3/26/13, Passover. The euro remains subdued at 1.2875, the
lowest numbers since last November. France confidence sentiment drops as well as industrial
output data. Cyprus tries to calm people by saying a
further bailout would not be needed but this is overshadowed by news that
the capital controls may continue for a
few weeks. S&P
rating agency downgrades Eurozone GDP from a -0.1% projection to -0.5%.
The broad indexes move higher at the
opening bell ignoring the Cyprus drama. The 8 MA pierces up through the 34 MA on the SPX 30-minute
chart signaling bullish markets for the hours and days ahead. The whipsaw verifies the ongoing indecisive
and erratic market behavior. Utilities, UTIL, prints above 500 as traders chase yield and perceived
safety. The Dividend Stock Bubble is
pumped higher as well. Europe continues to downplay the comment that Cyprus
serves as a template for all banks but Portugal
comes out in support of the depositor confiscations. That says Portugal may be next and you had better
pull your money before it is too late. Volatility
remains low so the markets remain elevated into the closing bell finishing
up strongly taking back yesterday’s losses. The SPX is at 1564 only one point away from the all-time closing high at
1565.15. The CPC put/call ratio, and
low VIX, confirms the complacency in the
markets. Traders are fully convinced that the Fed will support equity markets forever. President
Obama signs the Continuing Resolution (CR) to fund the government into
September. The Debt Ceiling limit will heat up now since the May deadline is only one
month away.
On Wednesday,
3/27/13, the European bond yields
react wildly to ongoing uncertainty. The 10-year yield shows Greece jumping over the
12% level, Portugal is over 6%, Spain is now back above 5% and Italy is moving
towards 5%. The perceived
safe havens are all seeing lower 10-year yields such as Germany dropping under
1.30%, and the U.K. now at 1.74%.
The U.S. 10-year Treasury yield
is falling like a stone from the mid 1.9’s yesterday to 1.85% this morning. A big flight
to safety is occurring. The euro falls
through 1.28. The S&P
futures are down six. Negative comments from Europe are
causing the weakness. Bersani says that a new Italy election is likely and it
is ‘insane’ to run Italy at this time. Monti says he can hardly wait to leave.
The broad indexes drop at the opening bell with the S&P giving back all of yesterday’s gains. Volatility
remains low, however, at VIX 13, so
the markets recover as the day moves along. Several
Fed heads speak today offering dovish comments but the markets do not rally on
the happy QE talk.
On Thursday, 3/28/13,
Germany retail sales are better than expected setting a happy tone, but, a
short time later, Germany unemployment data shows an unexpected increase of
13K claims
when a drop was projected. The euro immediately drops printing well under 1.28. The Cyprus banks reopen with a 300 euro
withdrawal limit (about $390) in place. Check-cashing will not occur. Transactions out of the country are
limited as well. Crowds appear at
the banks but the scenes are orderly and peaceful since capital controls are
very restrictive. Older citizens,
especially those without ATM cards, are the most cash-strapped. A new phase of the Euro crisis
develops since a
euro in Cyprus is now actually worth a little less than the same euro in the
main continent due to less liquidity. Think about that. The capital controls on the banks should
continue for many weeks and months and likely longer. Schaeble (Germany) says “Cypriots are
projecting their anger at others.” Markets recover into the U.S.
open. Today is the end of the month, EOM, and
end of the first quarter, EOQ1. The GDP
is 0.4% one tick below consensus. Chicago PMI disappoints. The markets are flat to up, however, ignoring
the bad news. At 10:33 AM EST, the SPX all-time
closing high at 1565.15 is breached for the first time in five and one-half
years. The pre-holiday
buoyancy kicks in and the markets
run higher into the closing bell. The SPX closes at a new all-time closing high at 1565.19
but remains under the all-time high at 1576.09 from October 2007. The markets
are fueled by the Fed’s easy money. The utilities, UTIL, are now over 508, moving up at a ridiculous rate of one
percent per week since the Autumn. The Dividend
Stock Bubble shows parabolic moves in DVY and SDY. Healthcare and consumer staples lead the rally as well which is odd,
since tech, financials and semiconductors should lead if the recovery was
reflective of a normal business cycle. Healthcare is up 50% over the last two
years. The Fed’s
money printing is bloating the perceived safer haven sectors such as dividend stocks, Dow blue chips, utilities,
healthcare, REIT’s and high-yield corporate’s. The central bankers are
making a mess of the markets creating new asset bubbles. In addition, money fleeing Europe is seeking perceived
safety and pumping the same stock sectors which blows the bubbles bigger and
creates the new market highs day after day.
The Dow
Industrials (INDU) printed another new all-time high and all-time closing high
at 14578.54. The leadership by small caps and tech in January
and February has started to lag in March. The first quarter ends with the SPX up over 10%,
the strongest move since 1998. Traders begin the Easter holiday
weekend in high spirits since the Fed is
the Easter Bunny delivering candy and guaranteed higher markets every day.
On Friday, 3/29/13, Consumer Sentiment surprises to the upside. This
is a surprise since gasoline prices
remain elevated and other sentiment indicators are turning sour. Italy
struggles to form a government and President Napolitano considers stepping down.
Germany’s Schauble says that Europeans
should not worry and their savings are safe. The hit to the major Cyprus depositors may now
be a shocking 60% confiscation.
On Saturday, 3/30/13,
Italy’s President Napolitano plans to meet with a
select group of individuals to find a way to form a government. The Italy mess becomes more confusing by the
day. Cyprus
depositors wait for confirmation today that as much as 60% of their funds will
be confiscated from the accounts holding over 100,000 euro’s. It is absolutely shameful that a bank steals
60% of your money. The world has changed forever. Russia will likely retaliate since they make up the majority of the
wealthy depositor’s. Since Russia
controls much of the gas and oil flow to Europe, next winter may be very chilly
for the Europeans.
-----------------------------------------------------------------
On Sunday, 3/31/13, Easter.
On Monday, 4/1/13, China PMI. ISM Mfg Index. Construction Spending.
On Tuesday, 4/2/13,
Factory Orders.
On Wednesday, 4/3/13,
ADP Employment Report. BOJ meets with new members for a two-day meeting;
the money pumping and yen weakening will continue.
On Thursday, 4/4/13, ECB Rate Decision and Press conference. Jobless Claims.
On Friday, 4/5/13, Monthly Jobs Report. International Trade.
Consumer Credit.
------------------------------------------------------------------
On Sunday, 5/19/13,
the 16.4
trillion Debt Ceiling hits.
In September, Merkel (Germany) seeks re-election and will not want to see Greece exit the euro before
the election but will not care afterwards. Perhaps Greece and Germany will both
exit the euro in the future.
In Q4 2013, European bank stress tests will occur.
On Friday, 1/31/14,
Chairman
Bernanke’s term ends at the Fed, unless there is news during Q4 2013
that he will stay on.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.