Category Archives: Stock market

Other predictions for 2015

Spending a few minutes reading the headlines today can make you feel bad. It feels like the world is on fire. Ebola, ISIS, Ukraine and some extremely currency movements. In a world like that, the U.S is seen as a safe harbor and the greenbacks is the safest, most reliable currency on the planet right now.

2015b

We witnessed a fantastic corporate earnings season, which was one of the best in the last decade. It is still a lot of work on jobs and housing, but the economy is well underway. How is it gonna be in the markets next year? No one knows, but there is a lot predictions out there. I will refer from two different investors today. One is positive and one is negative. Let`s take a look at the positive first;

No doubt, there is a market shift ahead, but it isn`t what you think it is. Based on different analysis, many indicators shows us that next year will be another fantastic year in the stock market. It will be another year to make money and the bull market will continue.

The bull market will not be what we have seen so far. It`s not gonna be another broad market rally like the rally we`ve seen the last few years. Stock picking will still be important, as there is a lot of stocks you should sell in 2015.

What you should buy is high-quality stocks with great fundamentals. You should buy one type of stocks next year.

Look at the truth about the economy. It took seven years to finally rebound from the Great Recession, and here are some key reasons why some investors expect the economy to keep charging ahead next year;

Fist of all; the oil shale revolution. According to the International Energy agency, the U.S will become the world`s leading oil producer next year. The energy boom will create jobs and lowering the gas and utility costs for consumers. That`s good news for the economy next year.

In addition; there will be low-interest rates. It may rise in the next 12 months, but the Fed will manage that rise slowly, which means it will remain ultra-low by historical standards, and that`s also good news for M&A activities, stock buybacks and cheap corporate borrowing that fuels stock prices, and business expansion.

Consumers are more positive to the economy and consumer confidence soared in October. Household net worth is back above 2007 levels, and consumer spending are rising at a moderate clip.

It looks safe in the U.S compared to the rest of the world. England`s housing market is collapsing. The Euro zone is on a brink to a deflationary disaster. Germany`s economy is deteriorating, and the growth has stalled in the once-hot BRICS. The U.S economy is surging. GDP was much stronger than expected 3,5% in Q3.

Chairwoman Janet Yellen has made it clear she intends to do whatever it takes to keep the economy and job growth strong. We survived the end of the Fed`s QE program and that was just one of the weapons in her arsenal.

The other one I talked about is negative. He expect the stock market to crash any time soon. It did in 1929, 1987, 2000 and 2008. The next crash will be next year he says. The bull market we have had over the past years is one of the longest, and most generous bull markets in history.

But, no bull markets lasts forever he says, and this one has about run its course. If you look at key long-term measures, U.S stocks are about 80% overvalued he says. There have been only five times when stocks have been more than 50% overvalued, and that is 1853, 1906, 1929, 1969 and 1999.

He said that each one of those years marked the peak of a massive, once-in-a-generation stock-market bubble. Only two of those bubbles were bigger than today`s, and that was in 1929 and 1999. This is the end of the line for this bull market he says.

You have to be sceptical about everything you read and it is very important to make up your own mind. I have heard about a 1929-stock-market-crash in ten years now. Many talked about a stock market crash all months this year. Same people talked about it in 2013 and 2012, but what we saw was a strong bull market.

But I can promise you one thing; one day they will have right!

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Outrageous predictions for 2015

On December 18 last year, I wrote about Saxo Bank`s outrageous predictions for 2014. It`s funny to read those predicions one year later. Every year Saxo Bank comes out with their outrageous predicions which is very funny and interesting to read. These are ten unlikely events, even if their risk is underappreciated, that would have significant consequences for global markets if Saxo Bank have right with their predicions.

Outrageous

This time they predict that Mario Draghi quits the European Central Bank to become Italian president. They predict that the U.K housing market to collapse, and a U.K exit from the EU. Furthermore; they predict China devalues yuan 20% and inflation of 5% in Japan.

Saxo Bank`s Chief Economist Steen Jakobsen said this about their predicions;
“2015 will be a tough year, but potentially also the year we look back at as the low point in everything. Inflation has fallen to its lowest in decades, interest rates have followed and energy prices are sharply lower.

The lack of volatility in data and in asset markets has given investors a false sense of security and that could lead to the biggest upset in 2015. We saw a possible preview of coming attractions during one week of mayhem in October of 2014. If that’s anything to go by, we are in for a rollercoaster ride in 2015.”

“Saxo Bank’s Outrageous Predictions remain an exercise in finding ten relatively controversial and unrelated ideas which could turn your investment world upside down. By imagining the most negative scenarios and events, whether a Russian default, volcanoes spreading havoc, or an internet Armageddon, investors have a chance to stress test their assumptions about the future and what these events might mean for their own investments. We must remember that while the predictions outline rather extreme market scenarios, over the years, a number of them have unfortunately come true.”

Saxo Bank’s Outrageous Predictions 2015

1. UK housing sector to crash
Surveys are already showing that momentum is fast leaving the UK housing market, particularly in London. The impending Bank of England rate hike will see the UK suffer a housing crash with prices falling as much as 25% in 2015.

2. Japanese inflation to hit 5%
Incessant Bank of Japan money printing crushes confidence in the yen as Kuroda-san finds that his policy to bring inflation back to his country is met with too much “success” – a symptom of Japan losing control of its currency.

3. China devalues yuan 20%
China will be looking for any way it can to ease the enormous deflationary pressures that are the downside of a credit boom. As deflationary risks loom China tears a page from the BoJ policy playbook and moves to devalue the yuan by 20%, joining Japan in its fight to import inflation and demand.

4. Draghi quits ECB
To bring the Germans fully on board with the European Central Bank’s move to QE, Draghi steps aside to allow for full ECB quantitative easing to proceed under a new president, Jens Weidmann of the Bundesbank. Draghi sees greater opportunity for his skills in Italy, where President Napolitano requests that he succeed him.

5. Russia defaults again
Plunging oil prices and a cold financial shoulder from Russia’s geopolitical antagonists see large Russian companies or the government itself defaulting on foreign debt. A default, like in 1998, is what is needed to secure the country’s future, together with a diplomatic solution on the Ukraine question.

6. Internet hacks smash e-commerce
In 2015, new attacks on e-commerce’s largest players become even more widespread and aggressive, sending shockwaves through the web and cloud service providers. Amazon.com, the largest e-commerce retailer and dominant player in web-based services, suffers a decline of 50% on the widespread fallout to the e-commerce industry and also because of its overvaluation.

7. Volcanic eruption cancels Europe’s summer
Like the volcano Laki in the year 1783, the already active Icelandic volcano Bardarbunga erupts in 2015, leading to a massive release of noxious sulphur dioxide and other gases that cloud the skies over Europe. The eruption shifts weather patterns and brings fears of a weak harvest across Europe, with grain prices doubling even as the volcano’s fallout proves more modest than feared.

8. Cocoa futures hit a record USD 5,000/tonne
Demand for chocolate is rising globally as Western preferences shift towards darker chocolate and Asian appetite increases. With supply affected by concerns over the Ebola virus and underinvestment in key West African production regions, the world is consuming far more cocoa than it is producing. This leads to a record high price for cocoa above USD 5,000 per tonne in 2015.

9. UK seen leaning toward 2017 exit from the EU (Brexit) on UKIP election landslide
The UK Independence Party (UKIP) wins 25% of the national vote in Britain’s general election on 7 May, 2015, sensationally becoming the third largest party in parliament. UKIP joins David Cameron’s Conservatives in a coalition government and calls for the planned referendum on Britain’s membership of the EU in 2017. UK government debt suffers a sharp rise in yields.

10. High-yield corporate bond spreads double
After a sentiment shift on high yield bonds, investors heading for the exits in 2015 discover sparse liquidity and steep price declines. With an ultimate washout in high-yield credit, shock waves will once again shake the foundations of Europe’s weak economy. The Markit iTraxx Europe Crossover doubles to 700 basis points in 2015.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Top 10 Economic Predicions for 2015

What`s next in the stock market next year? What about commodities, the dollar, Japan, China and Europe? Let`s take a look at Nariman Behravesh`s (Chief Economist at IHS) predictions for 2015. He expects global growth to pick up to 3 percent from an estimated 2,7 this year.

IHS outlined its top 10 economic predictions that make up its global outlook:

1. U.S. economy will power ahead
The world’s largest economy will continue to outperform its peers, driven by strengthening domestic demand, specifically consumer spending. The dynamics underpinning consumer spending—which accounts for 70 percent of gross domestic product (GDP)—remain very positive, including strong jobs growth, improved household finances and low gas prices. The economy will grow in the 2.5 to 3 percent range, IHS predicts.

2. Euro zone’s struggle to continue
The euro zone will continue to struggle with a weak labor market, but the combination of low oil prices, a weaker euro, reduced fiscal headwinds, easing sovereign debt woes, and an accommodative monetary policy will help lift growth. Expect a very modest acceleration of growth 1.4 percent in 2015 from 0.8 percent this year, says IHS.

3. Japan to emerge from recession
After suffering through its fourth recession in six years, the Japanese economy will rebound in 2015, albeit only to around 1 percent. The Bank of Japan’s (BOJ) easing and additional government stimulus, combined with lower energy prices, will push growth back into positive territory.

4. China will keep slowing
Further support from both monetary and fiscal policy won’t be enough to prevent growth from weakening further to 6.5 percent next year, says IHS. While poor by China’s standards, these growth rates are the envy of all major economies.

5. EMs: a mixed bag
Most emerging economies will see better growth in 2015, thanks to cheaper oil, a boost in global liquidity, and an acceleration in U.S. and European growth. Emerging Europe, Latin America, the Middle East and North Africa, and Sub-Saharan Africa will see the largest growth increases. Russia, however, will be a weak spot, reeling from the triple whammy of sanctions, plunging oil prices, and capital flight, says IHS.

6. Commodities slide to extend
Oil prices have plunged around 40 percent since the summer amid feeble global demand compounded by strong supply growth.
China remains key to the demand-side story, IHS says, noting that a further softening of growth will likely translate into another round of price declines. It forecasts commodity prices will slide 10 percent on average next year.

7. Disinflation threat
Disinflationary forces are the strongest in the developed world with commodity prices falling and global growth anemic. The exceptions are emerging markets, such as Russia, that have experienced sharp drops in their exchange rates and, as a result, a spike in inflation.

8. Fed will be the first to hike rates
The Federal Reserve, Bank of England, and Bank of Canada will start hiking rates in 2015—in June, August, and October, respectively, says IHS, barring a significant softening in inflation. In contrast, the European Central Bank (ECB), BOJ and People’s Bank of China are on track to either cut interest rates further and/or provide more liquidity via asset purchases and other means.

9. Dollar will remain king
The U.S. dollar will continue to strength on strong growth prospects and expectations for Fed rate hikes.
Meanwhile, anticipated additional stimulus by the ECB and BOJ means that both the euro and yen will continue depreciating in 2015. Euro-dollar will fall to $1.15–1.20 by autumn 2015, while dollar-yen will trade in a range of 120–125 next year.

10. Perennial downside risks easing
The global recovery has been plagued by a multitude of “curses” during the past few years, including high public- and private-sector debt levels that have necessitated deleveraging by households corporates and governments, says IHS. But these obstacles to growth are easing in some countries, notably the U.S and U.K., which explains their better-than-average performance.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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M&A continues

All sectors was in a red territory yesterday, but only one of them was up. The biggest loser was energy and the winner was the heath care sector. So far in 2014, the biggest loser is the energy sector, while the health care sector is the winner. This is just what I expected it to be in 2014. Read my article titled; health-care bull, dated January 8, 2014.

The takeover boom is not over yet, and 2014 will be the best in many years. Lawyers working with advice on takeovers say they`ve got a robust pipeline of deals in the works. Some of their works is delayed, so December will be busier than usual.

Health care stocks soared in 2014 and next year is shaping up to be another great year for these stocks.

The shares of Cubist Pharmaceuticals Inc rose 35% yesterday, and the reason is that pharmaceutical giant Merck (MRK) want to acquire its smaller peer for $102 per share. Included the debt, the deal is valued at $8,4 billion. This deal will strengthen Merck`s leadership position in the hospital acute care market.

Two of Cubist Pharmaceutical`s three commercial products focus on treating difficult-to-fight infections, and the firm`s reputation has become a «superbug» specialist in a business that has overlooked such infections until fairly recently.

The deal will be financed primarily by the issuance of about $9,5 billion in new debt, and Merck expect the deal to add about $1 billion in annual revenue. Cubist Pharmaceutical`s drugs should become significantly accretive to Merck`s EPS from 2016.

I wrote about M&A activity last year. Read my article titled M&A (merger and acquisition), December 13, 2013. First of all; it is very lucrative for companies to buy now when the interest rates are historically low, and I think this will continue until the Fed makes a jump on the interest rate.

If you look at 2013, the S&P 500 was up about 30%, and that was a good sign of a healthy stock market. Credit markets was also good with higher leverage levels. About 18,000 Private Equity Firms were also looking for liquidity given strong prevailing market conditions, in addition to increased corporate cash and finite-lived private equity capital reserves. All this factors have led to high degree of M&A activity in 2014, but what about 2015?

Predicting the future is risky business, but what are you gonna do if you don`t belive in something?

By tracking global sell-side mandates and deals reaching the due-dilligence phase of a transaction, it is possible to forecast future deal levels. If you look at the deal volume reported by Thomson Reuters, you can indicate future changes in the numbers of announced M&A transactions.

The latest Q3 data this year will forecast Q1 2015, and that suggests sustained momentum in M&A activity through 2015. Deal volume is expected to go up, and hot sectors will be entertainment, media, consumer, manufacturing and telecommunication. The most active sectors are expected to be energy and technology.

A forecast is based on facts today, but as you may know everything can change tomorrow. A change in macroeconomic or political conditions or even a change in the financial markets will change the whole picture and that can happen overnight.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Transportation Stocks are Outperforming the DOW

Timing can improve your investment results and Charles Dow knew that better than anyone else 100 years ago. Some say that timing is everything, but it isn`t. Timing is interpretation. To watch the swings of the stock market are more important than ever for protecting your hard-earned investments.

Some investors are negative and some are positive. Positive investors say that the economy is good, but how do we know that? The strong rally lately is being led higher by economically sensitive groups like transports. I like to watch the Dow Jones Transportation Average Index (DJTA), which is closely watched to confirm the state of the U.S economy.

Chart

As you can see from the chart above, the transports take what the industrials make, and that simply confirm the trend of the Dow Jones Industrial Average (DJIA). DJIA will follow DJTA. In other words; if the DJTA is declining while the DOW is climbing, it may signal economic weakness ahead.

What you see in the transportation industry affects almost all other industries covered in the DJI. Wal-Mart and Home Depot (on the DJI) rely on transportation shipments to stock their stores. Also Coca-Cola, IBM and Caterpillar use transportation. Transportation providers can bid for higher contract prices, making their own outlook more positive and causing the DJT to rally. At the same time, the anticipated outlook of the transportation industry`s customers is reflected in its stock prices and the performance of the DJI follows DJT.

It may be a divergence in the two indices and if you see that signal, you know that the demand for transport is falling, which means the nationwide demand for goods is declining too. A bad sign. It didn`t look good at the beginning of September this year, but it turned up again 15 days later.

Airlines and railroads outperform the broader market and continue to expand revenue. In the last five days, the transportation stocks are up 6,24%, while S&P 500 is up only the half. Transportation stocks will continue to move higher as the energy price remain low. Dow Jones Transportation Average is up +15,18% YTD.

The best performer on the list so far in 2014 is Delta Air lines (DAL), which is up +41,57% YTD, followd by Alaska Air Group (ALK), up 37,14%. Avis Budget Group (CAR) is up +31,10% YTD, while FedEx Corp (FDX) is up only +13,40% YTD.

The economy continue to improve and a good indicator is, among others, the strong third-quarter earnings from Caterpillar yesterday. Caterpillar reported better than expected results in the third quarter and lifted its profits outlook for the year to $6,50 a share, up 5,5%.

Some popular ETF funds is iShares Dow Jones Transportation Average Fund (IYT), which represents the most popular way to track the transport sector. The fund manager have invested in a small basket of 21 securities, and this fund is heavily exposed to the railroad industry.

SPDR S&P Transportation ETF (XTN) is another one, with 39 securities in the basket. This fund is heavily exposed to trucking and airlines. The fund has been a good performer since they started the rally in November 2012.

Guggenheim Shipping ETF (SEA) is the worst performing ETF on the list. The fund tracks 27 shipping company stocks with high degree of risk.

If you want to check where the economy and the DJI stands, make sure to check the DJT as well. If the DJI is up while the DJT is down, you know that something is wrong, but right now, DJT is up about 16% YTD, while DJI is up about 1% YTD.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

 

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