Investors Not Settling For Beta Monkeys In China!

Beta Monkeys lol.  Someone needs to grab that url. "In finance, the beta (β) of a stock or portfolio is a number describing the relation of its returns with that of the financial market as a whole" (Wikipedia). Beta (relationship against S&P, Shanghai Composite etc.) is what managers should beat or you'd be better off owning a China Index ETF with lower fees and less risk (which still requires research). For example, iShares FTSE/Xinhua China 25 Index (FXI), SPDR S&P China (GXC) and iShares MSCI Hong Kong Index (EWH). Btw, the S&P, Dow and Nasdaq are at or near January resistance....
"There is a lot of interest in China, but investors are looking for top quality stock pickers in that market, and won't settle for the 'beta monkeys'," said Pyrke of Triple A Partners. (Link: Risk. Not for us, say some investors - 3/5/2010, Reuters)

Updates: Net Euro Shorts/Yen Longs, US Unemployment 9.7%, Payrolls Fall Less Than Expected, Greek Workers Tried To Storm Parliament, Footsie 18 Month High, S&P Cuts $3.39B Leveraged-Buyout Loans

Greek Protests Mount as Parliament Passes Budget Cuts: Video




Payrolls in U.S. Fell 36,000 (less than expected); Unemployment at 9.7% (Bloomberg)
Footsie jumps to 18-month high (FT.com)
S&P: Junk-Rated Issuers Tally Steady On Defaults, Downgrades (WSJ)
GM to reinstate 600 dealerships slated to be cut (AP)
Banks shuttered in Fla., Ill., Md., Utah (AP)
Western sanctions draft targets Iran's banks abroad (Reuters)
S&P Cuts Ratings On Another $3.39B Of Leveraged-Buyout Loans (CLOs) (WSJ)
Banks defend use of sovereign CDS trade to hedge risk (FT.com)
Net Euro Speculative Short Positions Decline Marginally From Record, Yen Longs Surge (ZeroHedge.com)
Google Targets Microsoft With DocVerse Deal (WSJ)
Obama Budget Plan Underestimates Deficits, CBO Says (Update1) (Bloomberg)
Wen May Struggle With 3% Inflation Goal After China Credit Boom (Bloomberg)
Greeks ban hedge funds in bond sale (FT.com)
Striking Greek workers shut down transport and tried to storm parliament (Bloomberg)
Yields on Tax-Exempt Bond Sales Reach Lowest in Three Months (Bloomberg)
Greece Won’t Sell Islands to Cover Debts (NYT)
UPDATE 1-Beijing says working with Google to resolve dispute (Reuters)
Robert Prechter Says Equities to Drop, Invest in Cash: Video (Bloomberg Video, 3/4)
Pandit Says Citi Playing Critical Role in U.S. Recovery (Bloomberg Video, 3/4)

S&P 500 Re-Testing Downtrend Resistance From 2007 Peak ($SPY, $TLT, $SPX)

The market (S&P 500, $SPY) is re-testing the ultimate downtrend from 2007 again after correcting 9% (see put activity) from that level in January.  All eyes are on the jobs numbers tomorrow to provide a catalyst for direction.  Also look at the 20 month moving average.  Since 2000, if the S&P broke above/below the 20DMA it determined the next multi-year bull/bear market.  BUT, from 2000-2007 $SPY was riding an uptrend from 1989 which was broken in 2008.

In the end, $SPY (S&P 500 ETF) needs to break through the downtrend from 2007 and above the January 2010 highs to build supportive infrastructure to reach the castle and defeat the King aka the 2000-2007 double top which looks like 1,500.  That's 378 points away and we just added 500 from the March 2009 lows so it could take months or years.  That will be a memorable moment and will probably set the stage for the next 20 year bull market but hopefully it won't be the result of hyperinflation and/or artificial in nature (a breakout but not priced in gold).  If the market fails at this downtrend, the correction from January could proceed and the February lows would be in play (see free MarketClub video: Line Drawn In The Sand For Equity Markets).

S&P 500 40 Year Chart (Courtesy of FreeStockCharts.com)

Edward Lampert 2010 Sears Holdings Annual Letter, 13F RBS Partners (Fiscal Year 2009)

Is it time to start charting out valuation ratio trends, comparables and financial statement trend Elliot Waves? Find the Sears Holdings annual letter and Q4/fiscal year 2009 results at http://www.searsholdings.com/invest/ and see RBS Partners (holding company for Sears Holdings) Form 13F for holdings ended 12/31/2009. Next Warren Buffett?

Sears logs best quarter in 3 years, Chairman Lampert answers critics of his strategy (ChicagoBusiness)
"Chairman's Letter

February 23, 2010

To Our Shareholders:

Today we announced our financial results for our 2009 fiscal year. I am pleased to report that we delivered both stability and progress, resulting in roughly $1.8 billion of Adjusted EBITDA, an improvement of more than $200 million over 2008. While this may be surprising to some, it isn’t to me. The dedication of our associates and leadership team led by Bruce Johnson and the diversity of the Sears Holdings business portfolio—Sears Full Line stores, Kmart stores, our Home Services business, Sears Auto Centers, Outlet Stores, Hometown Stores, the Kenmore, Craftsman, DieHard and Lands’ End brands, our majority interest in Sears Canada, and our online business properties including sears.com—have allowed us to successfully manage through the economic and financial crisis of the past two years.

Today, the United States stands with an unemployment rate close to 10%, a housing market that appears to be stabilizing at depressed levels, and uncertainty over government policy and geopolitical events. Despite this, Sears Holdings continues to make progress against our strategic initiatives and our long-term financial goals. I recognize that our financial results, while substantially improved from 2008, remain well below where we would like them to be. At the same time, we have seen significant improvements in our focus on customers and the transformation of our culture.

I would like to do several things in this letter. First, review 2009 at Sears Holdings. Second, look ahead to 2010 and beyond. Third, discuss some policy issues generally including job creation, and finally, address some consequences of ecommerce tax practices.

2009 in Review

In 2009, we kept expenses under control and stayed focused on our vision and strategic, operational, and financial goals. We were both prudent and opportunistic in spending money and in allocating capital at a time when many others had to make major adjustments.

Early in the year we amended and extended our revolving credit facility through June 2012. In one of the most difficult financing markets in recent memory, we found significant support from numerous financial partners led by Bank of America, Wells Fargo and General Electric, and we executed one of the largest revolving credit facilities in the past couple of years. Our substantial asset base and our strong cash flow management were important factors in this successful deal. When people take a close and objective look at our company, our strengths are not difficult to see.

Gold Rallying In US Dollars, Update on Gold/S&P, Gold/USD, USD/SPX, USDX

It's been an interesting week.  If the US Dollar Index (Chart 2) breaks support and tests the uptrend (79.5), 50DMA (78.84) or floor support (78.5), Gold priced in US Dollars (Chart 1) could test $1,150 aka the January highs.  In the first chart you can see it pierced through a downtrend resistance level and is riding the 50 and 100 day moving average.  Gold in US Dollars is currently trading at 1,134.  1,150 is an important resistance level and will prove if the mini inverse head and shoulders bottom has legs.  If that level is broken with momentum it could possibly be a decent hedged long to test the ultimate highs and beyond (like I said earlier 2/21).

Regarding Gold v. S&P (Chart 3), they've been dancing since the beginning of the year trading between .99-1.02.  When gold broke out at the end of 2009 (Oct-Dec) the Gold/SPX ratio went from .95-1.10.  Por último, look at the USD/SPX ratio (Chart 4).  With the recent rally in the S&P and a stagnant Dollar, the USD/SPX ratio is now testing the 50 day moving average and December support level.  If Marc Faber is right that the Euro gets squeezed to 1.40, that will support the USDX correction trade.

A bunch of decisions need to be made in the overall market. I'm waiting for a big catalyst even if technical.  Btw:  Greece braces for deeper spending cuts, as EU tightlipped on rescue plan (AP) ("We are today in a state of war in front of negative scenarios for our country," Prime Minister George Papandreou said."). 

Marc Faber: Euro Oversold, If S&P Above 1150 Could See 20% Correction

Marc Faber was on Bloomberg in Hong Kong giving detailed thoughts on the market. He writes the Gloom Boom Doom Report.  I quoted the segment for those with Youtube blocked. He gives his thoughts on the market, Euro and US Dollar.
Market: "I'm not so sure that we'll make new highs but if we make a new high above 1,150, I don't think it will be that far above the 1,150 level, maybe 1,200, and that thereafter we have a bigger kind of correction on the downside.  I think if we make a new high then I wouldn't rule out a correction of at least around 20% and don't forget many shares in America and globally have already corrected 20%, so for them to make a new high isn't going to be all that easy in the first place. So what we could see is a new high in the S&P and the Dow Jones that is not confirmed by the new high list. In other words you will make a new high with fewer stocks making a new high than in January."

Updates: GM Recalling 1.3 Million Vehicles, Dave Bing Downsizing Detroit, Unemployment Benefits Extension Blocked In Senate, Gold Counterfeiting Using Tungsten, Betting On The Blind Side (Scion Capital)

Frank speaks with Mayor Dave Bing about downsizing Detroit to save it (Audio WJR/760 Detroit)
Bing blames union for looming city worker layoffs (DetroitFreePress)
Betting on the Blind Side (Vanity Fair) about Scion Capital's Michael Burry (h/t Morgan_03)
GM recalling 1.3 million vehicles over steering problems (Reuters) h/t ZeroHedge
US senator single-handedly freezes unemployment payment (BBC)
2,000 transportation workers idled over impasse (AP)
Gold counterfeiting using tungsten? (Zero Hedge)
Japan's unemployment rate falls in January (AP)
Australia Raises Key Interest Rate to 4% on Recovery (Bloomberg)
Google acquires Picnik: Perfect fit for Chrome OS (ZDNet) (photo editor)
Google buys Photo-editing Site Picnik (TechTree)
Gross Says Sovereign Debt to Resemble Corporate Returns (Bloomberg Video)
Finnish Recovery at Risk as Strikes Threaten Exports, Traffic (Bloomberg)
ABC Threatens to Go Dark in New York in Spat With Cablevision on Sunday (TheWrap via SkyGrid)
Swiss PMI hits two-year high, price pressures emerge (Reuters)

Double Bottom In Mutual Fund Cash Ratio? Prechter Thinks Optimism Signals Top and Bond Market Biggest Bubble In The History Of The World (Video)

Robert Prechter of Elliot Wave International (see below) is back trying to kill everybody's buzz, lol.  He was featured on Tech Ticker on 2/24/2010.  He's still bearish and probably one of the biggest contrarians on the market right now.  He mentioned that mutual funds have a 3.6% cash/assets level which he considers "an incredibly dangerous level indicating extreme optimism among mutual funds and their clients" and "low cash levels tend to coincide with tops".  So will the mutual fund cash ratio double bottom here at 3.6% (3.4% in 2007) or will the cash ratio squeeze to 3.2% before a volatile event forces re-balancing.  That's yet to be seen, but he always makes interesting points.  In the interview he provided a chart comparing the mutual fund cash-to-assets percentage to the market.  It's interesting that he also thinks the "bond market is the biggest bubble in the history of the world".  So he said stay in cash inside safe institutions or in Treasury Bills (shortest duration).  I'm going to chart out $SPX and SPY on long and short term time frames next.  The long term trend is the most interesting and at an inflection point..

Greece, UK Debt Crisis Through Eyes of Currencies (EUR/USD, GBP/USD)

Watch the sovereign debt crisis in Europe through the eyes of currencies (March 1, 2010).  In this case the Euro (EUR) and Pound (GBP).  EUR/USD (Euro in Dollars) is still trading in a downtrend channel and 1.3457 is ultimate support which, if broken, opens the door to lower levels (1.30 or perhaps parity). Read the post I did on Sunday for more info on Euro/Gold, Euro/USD, the Euro hedge fund meeting (Soros, SAC etc.) and an interview with German banks via Deutsche Welle.

EUR/USD (Euro/US Dollar) - FreeStockCharts.com

Now a look at the British Pound.  On February 8 I did a blog post on GBP/USD when it was at 1.55 and said make sure it stays above October 2009 support (1.57) or it will test the 1.40s.  It hit a low of 1.478 this morning, -1.5% on the day and -4.6% in 3 weeks.  There was buying/covering off that level this morning.

Updates: Greece Bailout?, Faber at Japan CLSA Forum, VW Profit Falls, February Payroll Preview, Brazil Stocks, Real, US Unemployment Benefits and China Labor Shortage

News from Twitter stream and journey around the interwebs on 2/28/2010.

Greece Bailout Plan Takes Shape [WSJ]
h/t @alea_
Defying Global Slump, China Has Labor Shortage [New York Times] h/t @asiablues
Markets poised to punish Spain [FinancialTimes]
Payrolls Probably Declined in February: U.S. Economy Preview [Bloomberg] h/t @gregormacdonald
Brazil stocks end Feb up 1.7 pct, real firms 4 pct [Reuters]
1.2 Million to Lose Unemployment Benefits Today [Calculated Risk]
Ze Germans: "Only The IMF Can Help Greece" [ZeroHedge]
TCW On Greece: "Let It Burn" (Komal Sri Kumar) [ZeroHedge]
CLSA Greed & Fear [theback9]
Fannie Taps Treasury for $15.3 Billion More After a 10th Loss  [Bloomberg] h/t @in_economy
Lloyds in £42bn bill from toxic HBOS [FinancialTimes, 2/26]
VW Profit Falls 80% as Buyers Favor Less Costly Cars [Bloomberg, 2/26]
January home sales fall 7.2%, median price unchanged  [USA Today] h/t @asiablues
U.S. Stocks to Fall, Faber Says; Wood Doubts Recovery [Bloomberg 2/22, CLSA Japan Forum]
Marc Faber, One Dr. Doom has brighter view of Japan [MarketWatch 2/22, CLSA Japan Forum]

Bernanke Semiannual Monetary Policy Report to Congress (2/24/2010)

Careful Behzad! Read this: Is Ben Bernanke The Second Coming Of Rudolf von Havenstein, The Central Banker Responsible For Germany's Hyperinflationary Collapse (And Ostensibly WWII)?

Chairman Ben S. Bernanke
Semiannual Monetary Policy Report to the Congress
Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.
February 24, 2010

Chairman Bernanke presented identical remarks before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, on February 25, 2010

Chairman Frank, Ranking Member Bachus, and other members of the Committee, I am pleased to present the Federal Reserve's semiannual Monetary Policy Report to the Congress. I will begin today with some comments on the outlook for the economy and for monetary policy, then touch briefly on several other important issues.

The Economic Outlook
Although the recession officially began more than two years ago, U.S. economic activity contracted particularly sharply following the intensification of the global financial crisis in the fall of 2008. Concerted efforts by the Federal Reserve, the Treasury Department, and other U.S. authorities to stabilize the financial system, together with highly stimulative monetary and fiscal policies, helped arrest the decline and are supporting a nascent economic recovery. Indeed, the U.S. economy expanded at about a 4 percent annual rate during the second half of last year. A significant portion of that growth, however, can be attributed to the progress firms made in working down unwanted inventories of unsold goods, which left them more willing to increase production. As the impetus provided by the inventory cycle is temporary, and as the fiscal support for economic growth likely will diminish later this year, a sustained recovery will depend on continued growth in private-sector final demand for goods and services.

Hedge Funds Bearish On Euro, German Banks Speak (XEU/USD, XEU/XJY, XEU/GOLD)

This was an interesting report out of Deutsche-Welle on 2/24/2010 on how banks view the Euro's future. Deutsche Bank didn't comment but economists at Deka Bank and Commerzbank did.  People on the street said they were used to the currency and didn't see a need to switch. Today (Saturday, 2/27/2010) all eyes are on Greek debt.  Germany, France, Dutch to buy Greek bonds: MEP (Reuters).
"ATHENS (Reuters) - Germany, France and the Netherlands plan to buy Greek bonds to help Athens cope with a severe debt crisis, a German member of the European Parliament said on Saturday." [full article]

Greece must take more measures or face sanctions: report (Reuters)
Flip Floppage (2/28): Greece may take more debt steps (Reuters)