Archive for the 'Europe' Category

Welcome to the FOMC Transparency Tour: 1st Stop is the Sausage Factory

Welcome to the FOMC Transparency Tour: 1st Stop is the Sausage Factory

The week at least started well as the upper echelon of fund managers heard from their “well-placed sources” that Helicopter Ben had miscommunicated the FOMC position when he spoke about tapering and would set the record straight at his press conference, imbuing them with the fortitude to get long in front of Wednesday afternoon.   Well, they got half the story right as he did set the record straight.

Taken alone, the FOMC minutes were positive for the market as nothing indicated that policy was going to change course.  The indices acted accordingly, swaying between green and red.  Then we found out that those sources were no more well-placed than a convertible parked beneath a tree with hanging bird feeders.  First, the FOMC projections were released showing that the targeted 6.5% unemployment rate was now forecast to occur in 2014, not 2015, and that GDP growth was accelerating.  Then, just prior to the reporter from TMZ asking Bernanke about his personal plans, his prepared remarks were released. Therein, Helicopter Ben dropped not more cash, but the bomb:

“We also see inflation moving back toward our 2 percent objective over time. If the incoming data are broadly consistent with this forecast, the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year; and if the subsequent data remain broadly aligned with our current expectations for the economy, we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around midyear. In this scenario, when asset purchases ultimately come to an end, the unemployment rate would likely be in the vicinity of 7 percent, with solid economic growth supporting further job gains—a substantial improvement from the 8.1 percent unemployment rate that prevailed when the Committee announced this program.”

So here we are: the transparency thing as he explained the Fed’s thought process.  The FOMC will begin to cut back this year and, depending upon the next jobs number, may do so before the third quarter ends.  The point that we reach 6.5% has been moved up but that is no longer the trigger; now it is 7% accompanied by an upward bias in the economy and inflation at 2%.  If only they kept that information to themselves we could have read the minutes and gone on our merry way as the market stabilized and perhaps moved higher.  In the old days, pre-openness, the market took the real hit when the rate increase actually occurred and usually upon the move deep into neutral policy territory.  I liked that more because the economy was then on better footing, earnings growth was apparent and valuation could withstand less accommodative policy.  But this is the worst of all worlds since we likely won’t see much growth in earnings this quarter, Europe is still uncertain and China is on the verge of a credit crisis that will make 2008 look like boom times.

I can’t imagine too many visitors to Jimmy Dean’s factory leave the tour and buy a few links in the souvenir shop, anxious to cook them up when they get back to the trailers.  Seems like traders feel the same way about the Fed post press conference, puking out their stocks and bonds, violating important levels of support.  However, once the vision fades and their stomachs settle, a curing period that will likely take us through earnings and up to the next FOMC meeting, they will recognize a great buying opportunity– at least for stocks.  Bonds, unfortunately, will stay in the grinder. For now, though, the carnage, bred through emotion, is likely done as atrophying now takes over.  Within that time frame there will be peaks and valleys as volatility, courtesy of Fed transparency, becomes the norm.  I’m up for nibbling for the long term but the market hasn’t corrected enough to find many real values.

China: Re-Entering The Atmosphere With A Hard Landing; Earnings Season And The Markets Disconnect; Energy; And Here We Go Again In Europe – But Wait! There Is Value

China is launching a major offensive for headlines with the EU.  Wen’s comments over the weekend were his strongest and most pointed yet as he warned of the possibility for “huge downward pressure” on the economy.  At the same time, inflation was reported at a very modest 2.2% leaving open the possibility of additional near term stimulus.  Additionally, Wen, in separate comments, remained resolute in keeping property prices under control.  As much credit as is inexplicably given to China by way too many strategists for ultimately being able to manage their downturn and draw a line in the sand at nothing less than 7.5 – 8% GDP growth, Wen does not seem as sanguine.  Whether China ultimately experiences a hard landing remains an unimportant conclusion at this point as that is the direction they are moving toward.  The bursting of their property bubble will be much more damaging to their economic future than was to the US when ours fizzled given that so many important Chinese cities have relied upon land sales and borrowing for their out-sized infrastructure spending.  It’s one thing for an individual to be upside down on their mortgage, but quite another for a large portion of a country to be in that position particularly when so much of the world’s economic growth has been dependent on China’s previous voracious appetite for commodities, machinery, etc.

But wait – there’s those trillions in reserves that China is going to shower on the economy much like an NFL defensive back at a “gentleman’s” lounge.  My view is that China, continuing to think long term, would rather see asset values to decline meaningfully so that they can swoop in and acquire them.  It’s not only asset prices that soften, but also political resistance in the targeted countries as the fate of elected leaders is tied to declining personal fortunes of their constituents.

Steel stock rally?  Done before it started.  Angang Steel said it will report a loss of 1.98 billion yuan for the first six months compared to a profit of 220 million yuan last year.  Angang is China’s largest HK traded producer of steel.  Despite this, China keeps adding to its steel capacity and keeps running its plants at capacity, more concerned with employment levels than price realization.  It’s expensive to shut down capacity in steel and it remains the industry with the highest costs of exit.  Sector will bounce around but direction is lower. Take a lesson from coal (PCX bankruptcy filing) and stay away.

And within the backdrop of all this, those optimistic about the market say all the bad news is fully discounted.  After all, once it’s in print, see yesterday’s WSJ’s article on the earnings season – it is immediately old news.  That’s an interesting thought considering that the S&P is up mid-single digits this year while expectations on global growth have been ratcheted much lower.  Seems like a disconnect to me.  I’m not looking for a major sell-off but a slow ebbing of the averages.

Meanwhile, back in Brussels, the framework announced out of the latest – that is the 19th, EU meeting to solve their financial crisis, has hit a predictable speed bump as Hollande offered that a more unified political and banking system will not happen as quickly as thought while Germany remains resolute in requiring government to be the ultimate guarantor for the debts of troubled banks.  Seems that the Europeans don’t yet realize that substance is actually longer lasting than headlines.  Not sure the markets realize this either.

So here we go again. Rather than focusing on current fundamentals, the markets pin their hopes on major fiscal policy moves by China,  the US and, of course, the EU – hoping coordinated easing becomes reality, stimulating spending, credit and investment. Could be but I still don’t see an immediate, significant QE3.  But there is good news: the EU has set the bar very low.

There is value to be found.  I still believe the Euro is overvalued relative to the USD; that higher yielding equities with good fundamentals will continue to offer a good total return (mortgage reits, telco); and certain areas of energy remain attractive longer term such as natural gas and special situations.  TOT has a monstrous yield and HK, a build it and sell it story run by someone who has built it and sold it multiple times before (Petrohawk being the latest), is in a great spot, being able to acquire assets cheaply with financing both available and inexpensive.  I mentioned on CNBC on Thursday that I was starting to rebuild a position in WLP.  This group is also inexpensive, but I would wait for a pullback after yesterday’s action.  Sentiment has been horrendous and MLR’s are likely going higher this quarter, but in an industry with changing fundamentals, the smart players find opportunity.

 

Merkel Wagers EU pact on Semifinals; RIMM and HBS; Steel

I have three theories as to why the EU provided the market moving agreement overnight:

1)      Wagers between the Mayors of competing teams in the World Series or Super Bowl usually involve food – lobsters, steaks, etc.  The EU has taken this to an entirely new level.  As such I wonder whether Merkel wagered Germany’s approval of the pact announced this morning on the outcome of yesterday’s Euro 2012 Championship Semifinal match.

2)      Merkel is the anonymous GP of a very large hedge fund with lagging performance. Her lock-ups expire July 1st so she needed a big end of the quarter mark-up on her portfolio today.

3)      Merkel has been diagnosed with a very rare, life threatening disease and is not expected to live out the European ratification process, thus allowing her to stay true to her pledge “not in my lifetime.”

 

I have been neutral in terms of market exposure, cautious of the greater risk than reward, unwilling to bet that the 19th time is the charm.  While this agreement has some of the characteristics of the others – execution and final details to be worked out – it exceeded both my expectations and the markets’.  Nonetheless I do believe the rally can continue despite continuing trouble on the earnings front – NKE and F being the latest – until we reset over the next few weeks from earnings reports.  Within a relatively neutral exposure to equities I have been initiating small positions in some fairly beaten up names such as JOY, TOT and ANF and covered shorts in steel over the last few days, closing them out yesterday as a couple of steel companies reported EPS and the stocks rallied.  While the actual metrics on these companies are different than my shorts in X and MT, I didn’t believe the market would distinguish.    Should they rally much from here, I will return because the issues remain and the steel business has very high barriers of EXIT.  Unlike coal, capacity has increased as prices have declined due to softening end demand. I don’t see this changing with China continuing to  slow.

 

The rally in materials and energy, with extremely high short interest, is going to make next Weds.’ fireworks look like a Sputnik launch.

 

With European bank balance sheets still in disrepair and lending non-existent, unchanged in any meaningful way by today’s announcement, JPM should pick up significant share helping to offset the governor on earnings provided by tighter regulations and low interest rates in the US.  WFC has also started to expand beyond these shores, albeit in a not particularly meaningful way.

 

Thus the only questions are  “have stocks sufficiently discounted the slowing global economy?” and “is this just another false start by the EU fueling a quarter end short covering rally?”   To the first, the easy and correct answer is that some have and some haven’t.  To the latter question: Yes, for now but doesn’t mean we can’t rally for the next week or so.  I’m not going all in, that’s for sure.

 

RIMM – the Dean of Harvard Business School has likely sent a Thank You note to the BOD at RIMM, thanking them for providing the material for the best case study they have seen in years.  The death blow here is not the quarter but the continued delay in the release of the BB10.  Developers will not invest much in new apps for this device thus making it DOA.

 

iPad At The Ready; Is Icahn Greek & Germany’s 4 Day Work Week

Night after night, morning-to-morning, it’s the same routine.  The iPad sits at the ready, less than an arm’s length away on the nightstand, sharing space with an old school Blackberry, an alarm clock separating two generations of technology.  It’s the last thing I look at before I go to sleep and the first item I reach for when I wake.  I’m seeking out news, waiting for the solution.  That’s what I need to get off the sidelines, to put my cash to work. Sure equity valuations are cheap, that is if you believe the global economy is not worsening. Sure Treasuries are overvalued and in a bubble and asset allocation begs for a swap into equities but these factors have been in place for a year.  In the interim, China has markedly slowed and Europe is in an economic near death spiral. Ergo, I need something new: a plan that will work. I am fairly confident that I know what the answers are, I’m just hoping that some variations of it appear in a Reuters or Bloomberg headline:

ECB Lends $2 Trillion to Spain and Italy – Funds Targeted for Banks;

Greece Accepts Receivership: Icahn Reveals That He is Part Greek and Agrees to Head Creditors Committee

I would settle for one out of two, the ECB lending program being my first choice.  The last two days brought scant hope, with Spain’s Budget (a clear oxymoron) Minister asking for other “European Institutions” to “open up and help facilitate” a recapitalization of their banks.   (http://www.bloomberg.com/news/2012-06-05/spanish-minister-urges-eu-aid-for-banks-in-first-plea-for-funds.html).  I guess, a recognition by Spain that they have a problem is the first step toward a solution.  Record outflows of capital and the seizing up of the banking system has a way of offsetting the effects of too many carafes of sangria at three hour lunches more so than afternoon siestas.  However, there is little chance of Germany injecting capital directly into Spanish banks.  And then today, we had the ECB’s Mario Draghi tell us not to worry, capital is not fleeing, hoping to dispel us of the facts.  Nice try, Mario, but this will not help me sleep any better.

Here is how I believe the issue should be resolved in order to restore some semblance of sureness to the market. Actually, this is not really my original thought but rather that of an extremely successful hedge fund manager as we discussed the issues during a game of golf.  However, as a part-time talking head and part-time author, I am in conflict: the former imbues me with little respect for identifying ownership of ideas, claiming all as my own, while the latter avocation imbues me with abhorrence for plagiarism.  Since no one is paying for this advice, I will default to the former and provide what believe would put the market back on firmer footing in response to Europe.  While the ECB is not allowed to buy new issue debt from sovereigns, it can loan money to them.  Spain will ultimately agree to a program and, in return, the ECB will provide a 30 year loan with a nominal coupon to the government, specifically targeted for the banks.  This will not crowd out any other creditors, thus limiting resistance.  As part of this rescue package, and in lieu of using Spiderman towels and English lessons (wouldn’t German be more appropriate?) to lure potential depositors, the banks will offer greater levels of deposit insurance, backstopped by the ECB.   There will be greater, collective EU oversight to large EU banks as a condition to German participation without obligation of further German funding.

Perhaps the above won’t happen so here’s another thought.  It was also reported by Bloomberg that the EU and ECB is at work on a Master Plan (http://www.bloomberg.com/news/2012-06-03/ecb-eu-drawing-up-crisis-master-plan-welt-am-sonntag-says.html) and may have something ready by the end of June.  Well, that would be nice but this would have to be authored and led by someone other than Merkel’s countrymen since Germany’s last Master Plan didn’t work out well for anyone and time has done little to  erase the memory.  The problem is that no other European economy has the economic wherewithal to plug the dyke.  I imagine that Germany does a daily calculation comparing the breakup of the currency and the potential impact on trade with the cost of being the sugar daddy for the rest of the EU, albeit without the typical prurient perks of being so benevolent.  The Germans undoubtedly realize that they would have the world’s strongest currency were the EU to fail, thus crippling their own economy by making the price of their goods uncompetitive.  Here’s a solution: cut off the EU like you would a drug addicted stepchild and allocate those funds to internal spending, thus inflating the D-Mark and maintaining competitiveness in global trade.  Instead of the annual Oktoberfest, have a  Freitagfest and a 4 day workweek, placing them on more even footing with the rest of socialist Europe. That won’t drive the DM to levels on par with the drachma but will get you moving in the right direction.

So as my search for the evidence of a solution forges on, I remain on the sidelines although even the hint of a legit solution (or of an improving US economy) will rally an oversold market.  Oversold rallies, however, such as today’s (June 6), are to be sold, not embraced. Commodities will remain under pressure and steel is still a great place to be short as analysts now begin to look for losses in the upcoming quarter.  Recall that last year, X reported a loss despite a combined 13% volume and price increases.   Their end markets, with a slowing global economy, won’t be so kind this time around.   They didn’t even bother to offer a mid-quarter update at their analyst day today.

One more thing – look for downward revisions to multinationals pick up speed as the dollar retains its strength.

Playing Poker with the EU: Why There Won’t Be A QE 3

Wistful visions of a Bernanke Put have kept many invested. It is everything they want it to be: the lifeline, the safety net, the impetus for economic growth.  However, I believe it is unlikely to happen.  The logic is simple: Europe is much more fiscally troubled than the US and is arguably the source of not only market turmoil but also for economic angst in the US.  Without a shock and awe resolution from the EU, any further easing from the US will be ineffective in reversing our declining economic fortunes so why waste the powder.  And with Europe in much more desperate shape, in recession , broadly, and possibly headed toward a depression in Spain (Greece there already) it is much more incumbent upon the EU to provide a shock and awe solution to their economic woes sooner rather than later.  Additionally, Bernanke has come under significant criticism for his prior QE’s so why not let Europe do the heavy lifting this time around?  The European solution, if credible, will obviate the need for further stimulus from the US.  China keeps threatening to stimulate their economy and should this happen,  this could also lessen the burden on the American economy.   If I were Bernanke, I would play this hand to conclusion.  Not even another deficient jobs number will change my view.  In fact, I believe that the payroll report will come in above consensus based upon what I hear from my source who has been almost clairvoyant in their forecasts based upon real-time information.  They see strength across all sectors.  It won’t be a blow out number but should be comfortably above consensus.  This will lead to a short covering rally and a good opportunity to lower exposure

Separately, a great review for The Big Win http://seekingalpha.com/article/625331-book-review-the-big-win :

Book Review: The Big Win
Just as whale watching is a popular adventure tour for nature lovers, reading about the whales of finance is a popular pastime for investors. InThe Big Win: Learning from the Legends to Become a More Successful Investor (Wiley, 2012) Stephen L. Weiss profiles one woman and seven men who have truly excelled.

First, a caveat about what Weiss describes as “the ugly reality of whale watching,” by which he means “blindly following large, smart buyers into a stock or other investment.” (p. 25)

 

Unless an investor has insight into the whale’s rationale for making a particular investment, his time frame, and his risk appetite, the investor is at a considerable disadvantage. It is critically important, as Weiss writes, to “understand the process. … The true value of these case studies … is in understanding each investor’s methods, not standing in awe of their results.” (pp. 32-33)

 

Weiss’s eight legends—Renée Haugerud, James S. Chanos, Lee Ainslie, Chuck Royce, A. Alfred Taubman, James Beeland Rogers Jr., R. Donahue Peebles, and Martin J. Whitman— each carved out a niche and developed an investing style.

Haugerud, for instance, is a top-down investor. Her hedge fund, Galtere Ltd., has a five-stage investment process: taking the temperature of the global markets, developing a few themes, microanalyzing and selecting strategic investments, timing trades technically, and applying risk management. Her “big win” came in 1993. With gold trading as much as 40% above the world’s highest cost of production and the one-year bonds of Canada’s western provinces yielding 9 to 12%, she shorted gold for a rate of less than 1%, bought the bonds, and hedged her short gold position with undervalued small-cap stocks of mining producers in Australia that had high margins and low production costs. “‘All three legs worked,’ as Haugerud puts it, and all kept working for a good long while. It was a simple trade, and the returns were good enough to carry that year’s performance to her stated goal and beyond.” (p. 50)

Chanos is a short seller, Ainslie a stock picker, Royce a small cap investor. Taubman and Peebles are both real estate developers, Rogers is a commodities investor, and Whitman is best known as a distressed debt investor.

What do all these legends have in common? Weiss catalogs seven traits: no emotion, no ego, long-term investors, discipline, thorough research process, passion and work ethic, and drive. Or, reduced to six words:

 

“Drive. Passion. Process. Equanimity. Discipline. Humility. These are the commonalities between all those profiled in this book and the qualities that make for a great—and legendary—investor.” (p. 17)

 

The Big Win is an easy, thoroughly enjoyable read for those who want to learn from the whales.

The European Spring: Why Caution is the Best Market Position

In typical Hollywood fashion, the producers of the successful Arab Spring

have announced the sequel,  The European Spring, starring the people of

France.  In fact, pre-filming has already begun for the 3rd installment in

the series, The US Spring which will be airing the first Tuesday in

November.

The French

The French hosting elections on a Sunday is itself an interesting issue; I

have to assume they value their days off during the work week too much to go

to the polls than they value their leisure time on Sundays.  Logistics

aside, the polls point to a victory by François Hollande and socialism again

taking front and center stage in the City of Lights.  (Why shouldn’t

Parisians leave the lights on – the government is footing the bill.)   Of

course, Sarkozy can pull it out in the final days if he is able to draw in

the fence sitters and Le Pen acolytes; this should not be completely

discounted.  But assuming Hollande wins, I have heard the argument that this

event is already priced into the market. So will the rhetoric about

endangering the EU fade as political campaign promises often do?  Not on

your life.  With legislative elections upcoming on June 10th and June 17th,

the rhetoric is just beginning.  Those arguing against France’s

participation in the bailout fund and austerity as the path to growth will

be emboldened to speak even louder.  That, after all, will be the proven

path to winning a seat in the National Assembly of the Fifth Republic.

The Greeks

The Greeks have their own election on Sunday.  With massive unemployment,

there is hardly a reason to hold their elections on the weekend. Don’t these

people need something to do during the week or is that when the beaches are

less crowded?  From all reports, it looks like the coalition will survive by

the slimmest of margins. The rhetoric here too will build as their exit from

the EU remains the likely end game.  But if the coalition falls apart,

either on Sunday or near term, then the collapse of the EU is an immediate

fait accompli.

The Rhetoric

So the chatter will increase as the citizens of France, the Netherlands,

Italy, etc., continue to question with increasing authority and anger, why

they should labor under austerity programs in order to support the

irresponsible governments of Spain and Greece.  This will continue to

pressure the indices particularly as Spain and Italy continue coming to the

market to roll over their debt. At present, there is no avenue to growth and

Draghi seems unwilling to inject anymore stimulus into the markets until

governments put forth growth initiatives (and maybe, actually do cut

spending).

The Sequel

So this is the sequel to the Arab Spring as the Europeans rise up and say no

mas.  It is a more civilized uprising, as they perhaps torch candles instead

of themselves, but an uprising nonetheless. And then, in November, it will

be our turn.

Add to this the slowing US economy – yes, slowing, not a pause, and the EU

and China continuing to slow, and you have a rather poor outlook for US

equities.  But Brazil is the bright spot, isn’t it?  Nope. China is the

economic delta for Brazil.  We had an earnings season that few had expected

in terms of growth and outlook but the skepticism about the future is what

preys most acutely on the market, and, the economy.  Sure there are bargains

to be had but like most retailers, there is never one clearance price.  And

yes, Treasuries are fully valued and arguably in a bubble, but that’s been

the story for a while too.  I don’t know who is good picking bottoms and

tops so I’m staying low beta and fairly neutral.  There is very little

chance that under this scenario, allocators have a call to arms for

equities.  That will happen but not now. Not perhaps unless there is a

Romney victory and Europe puts forth some plans for growth.  I would

actually support a position that puts Greece in default, cuts back on

austerity in favor of responsible spending for growth  but I’ll leave my

daydreaming for when I’m at the chick flicks my wife occasionally drags me

to.

I continue to be short global cyclical stocks such as materials.  I hate

beta, except perhaps on the short side and bunting instead of the long ball.

As my favorite metals and mining analyst, Pete Ward, said to me yesterday,

“steel has very high barriers of exit.”

During your market respite, you may want to read an excellent new book: The Big Win.

News Flash: Europe is Slowing; News Flash: China is Slowing

March 22, 2012

News Flash: China is Slowing

News Flash: Europe is Slowing

News Flash: Goldilocks May Have Left the Building

“There is the school of thought, of which I am not a student, that believes we shouldn’t worry about China and Europe since U.S. GDP is not overly reliant upon either Europe, 2% of total U.S. GDP, or China, 0.6% of GDP, but given that our economic revival is not particularly robust, any potential hit to growth has to be regarded seriously.   And it is the strengthening domestic economy, abetted by perhaps misplaced optimism on the global economy that overshadows the current weakness abroad.”

Like most, I tend to operate from selective memory. Sometimes I have to venture far into the archives to find a pearl of wisdom, other times the proverbial ink has yet to dry. Fortunately, this occasion finds me in the latter camp leading to a trip back to March 6th.  I actually present this somewhat cheekily since the S&P has had a nice move since the date I wrote the above but completing the thought, I remained bullish equities within a much reduced net long position laboring under the belief the non-US swoon would not really hit our economy until year end.  That is still the case from an economic standpoint.  It shouldn’t be a surprise to anyone that the massive credit issues in Europe have caused a slowdown nor should anyone be surprised about China, where economic indicators have revealed a contracting economy for 4 months.  However, with the market being a discounting mechanism perhaps I was too optimistic.  I went on to say:

“To bottom line it, the market is in a consolidation phase and faces the likelihood of a minor correction near term while remaining highly dependent upon data in the U.S. and continued optimism about the European and Chinese economies.” 

This will update my outlook and clarify my views.  The market is in a consolidation phase with a slight bias to the downside in the very near term as we are in a good news vacuum pending earnings.  Optimism still reigns regarding China’s ability to manage their way out of their declining economic fortunes and the yields on sovereign debt in the countries that matter, while recently forfeiting some of their optimism, are still at much more reasonable levels.   THE KEY FACTOR GOING FORWARD WILL NOW BE EARNINGS SEASON which I suspect will acquit itself well in most areas of the economy except for certain sectors, such as coal and steel, where I have been very visibly short, and which have already updated their outlook.   (Every steel company, regardless of business model, has disappointed but has guided to a turn in fundamentals resulting in a nice move off the bottom.  I am still short.  And coal remains in a death spiral.)   This will provide support for the market at that juncture but for now, in a good news vacuum, the path of least resistance is slightly lower.

But the key to a further rise in equities is the direction of US govt bonds.  While flows continue into bond funds in a meaningful way and out of equities in a less meaningful manner, a situation that surprises me, I believe this will reverse. I am short through TBF and TBT because I believe most investors have come to expect unabated and unprecedented performance and don’t realize that a an 85 bps back-up in yield from 2.15% to 3% will result in approximately a 7% loss in capital, an untenable risk/reward when considering that any appreciation of Treasuries is in the best case, severely limited.   And as the EU sovereigns continue to hold these levels, funds will flow from bunds and bonds into their higher yielding debt.

Within the slowing of global growth view, I remain short the Euro and Aussie dollar, materials and transportation, CSX (dicey), and long technology, big US banks, and defensive value.  The market will continue to pause, but not collapse, into earnings season and unlike each of the other reporting periods since the bottom in March 2009, expectations are much lower setting up for decent equity performance for the next quarter unless sentiment regarding Europe and China fall off a cliff.  I realize this straddle risks my being likened to a sell-side strategist, a label more feared than “moderate Republican” but that’s how I see it.

 


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