5 gut checks before the stock market's opening bell
By Shawn Langlois
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Good morning.
The back end of August is traditionally the slowest time of the year for the markets, but that doesn't mean there aren't some developments worth keeping an eye -- maybe even two -- on. The flesh-pressing and fly-fishing in Jackson Hole, Wyoming will probably yield plenty of headlines, as will the release of the Federal Reserve minutes on Wednesday. Both will be oozing with urgency, most of it manufactured, throughout much of the week.
Drilling deeper into the markets, rotation has been a buzzword all year -- specifically the move out of bonds and into equities that was a constant theme through much of the first half. Well, there's a new rotation underway that could leave its mark on the second half, and that's the march out of the U.S. and into Europe.
Over the past month, the S&P shed more than 2%, while European stocks tallied a rally of about 5%. The first half of August saw the biggest flow into European stocks from U.S.-based funds in two months, according to Thomson Reuters Lipper.
That's a massive shift from the first six months, when U.S. investors crushed their European counterparts. The performance over the past few days on the Dow probably won't do much to inspire a reversal of the trend. Blue chips just endured their worst week this year, and stocks are drifting aimlessly premarket.
Key market gauges:Asian markets closed mixed for the most part, while Europe isn't mustering any positive momentum. Futures on the Dow and the S&P are sluggish early, as well. Gold and silver are mildly positive, adding to last week's hefty gains, which included silver's best stretch in five years.
The buzz: A New York Times profile over the weekend pushed Amazon's Jeff Bezos to the top of the Google business page. Business Insider followed up by pointing out how secretive the man and the company are. In the number two spot, Yahoo boss Marissa Mayer is still grabbing attention for her Vogue shoot .
J.C. Penney is trending on StockTwits ahead of what looks to be a busy week for clothing-retailer earnings . Also reporting in the coming days are Abercrombie & Fitch , American Eagle Outfitters and Aeropostale . They'll look to do better than Wal-mart and Macy's did last week.
The suicide of a wealthy Herbalife distributor, who earned about $3 million last year, is grabbing upvotes on Reddit.
The chart of the day: Margin debt is again hovering around extreme levels, according to GaveKavel Research's Charles Gave. He reminisced about an old boss who once told him, "Charles, you will never get rich in this business using other people's money. Do NOT leverage your positions. Leverage might be all right for fellows who deal in real estate, but for those in stock markets, it only brings misery." Gave ignored at first, but then suffered a few margin calls. Now, he's on board, and says that those prone to using borrowed money "seem to get most enthusiastic just before a recession, usually after a prolonged outperformance of equities against bonds." Hard to argue with him from the looks of this chart (h/t Mauldin Economics ).
The back end of August is traditionally the slowest time of the year for the markets, but that doesn't mean there aren't some developments worth keeping an eye -- maybe even two -- on. The flesh-pressing and fly-fishing in Jackson Hole, Wyoming will probably yield plenty of headlines, as will the release of the Federal Reserve minutes on Wednesday. Both will be oozing with urgency, most of it manufactured, throughout much of the week.
Drilling deeper into the markets, rotation has been a buzzword all year -- specifically the move out of bonds and into equities that was a constant theme through much of the first half. Well, there's a new rotation underway that could leave its mark on the second half, and that's the march out of the U.S. and into Europe.
Over the past month, the S&P shed more than 2%, while European stocks tallied a rally of about 5%. The first half of August saw the biggest flow into European stocks from U.S.-based funds in two months, according to Thomson Reuters Lipper.
That's a massive shift from the first six months, when U.S. investors crushed their European counterparts. The performance over the past few days on the Dow probably won't do much to inspire a reversal of the trend. Blue chips just endured their worst week this year, and stocks are drifting aimlessly premarket.
Key market gauges:Asian markets closed mixed for the most part, while Europe isn't mustering any positive momentum. Futures on the Dow and the S&P are sluggish early, as well. Gold and silver are mildly positive, adding to last week's hefty gains, which included silver's best stretch in five years.
The buzz: A New York Times profile over the weekend pushed Amazon's Jeff Bezos to the top of the Google business page. Business Insider followed up by pointing out how secretive the man and the company are. In the number two spot, Yahoo boss Marissa Mayer is still grabbing attention for her Vogue shoot .
J.C. Penney is trending on StockTwits ahead of what looks to be a busy week for clothing-retailer earnings . Also reporting in the coming days are Abercrombie & Fitch , American Eagle Outfitters and Aeropostale . They'll look to do better than Wal-mart and Macy's did last week.
The suicide of a wealthy Herbalife distributor, who earned about $3 million last year, is grabbing upvotes on Reddit.
The chart of the day: Margin debt is again hovering around extreme levels, according to GaveKavel Research's Charles Gave. He reminisced about an old boss who once told him, "Charles, you will never get rich in this business using other people's money. Do NOT leverage your positions. Leverage might be all right for fellows who deal in real estate, but for those in stock markets, it only brings misery." Gave ignored at first, but then suffered a few margin calls. Now, he's on board, and says that those prone to using borrowed money "seem to get most enthusiastic just before a recession, usually after a prolonged outperformance of equities against bonds." Hard to argue with him from the looks of this chart (h/t Mauldin Economics ).
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Macrobond
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The call of the
day: Wake up and smell the coffee. It's been a brutally tough
stretch for one of life's most scrumptious treasures, but the Short Side of Long blogger says we're
approaching a turning point. His basic thesis is that every bit of negativity
is priced into the commodity, and the hedge funds continue to be extremely
bearish. However, as you can see by the chart below, the difference between
coffee's price and its 200-day moving average is narrowing. This has happened
two other times in the past two decades, according to the blogger, and it's led
to a pop both times. Look at this coffee ETF for one way to play it.
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Short Side of Long
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Random reads:
The smart cities of the future . And the present.
Higher earners are having more sex than you, study shows .
Murder by Craigslist, from the Atlantic .
Oprah and LiLo. As usual, the Twitter reaction was better than the interview itself.
Zuckerberg gets hacked. Company won't pay $500 reward . Peanut gallery says Facebook is the Halliburton of social media.
Need to Know starts early and is updated as needed until the opening bell, but sign up here to get it delivered once to your e-mail box. Be sure to check the Need to Know item. The e-mailed version will be sent out at approximately 8:45 a.m. Eastern. Follow @slangwise on Twitter.
Higher earners are having more sex than you, study shows .
Murder by Craigslist, from the Atlantic .
Oprah and LiLo. As usual, the Twitter reaction was better than the interview itself.
Zuckerberg gets hacked. Company won't pay $500 reward . Peanut gallery says Facebook is the Halliburton of social media.
Need to Know starts early and is updated as needed until the opening bell, but sign up here to get it delivered once to your e-mail box. Be sure to check the Need to Know item. The e-mailed version will be sent out at approximately 8:45 a.m. Eastern. Follow @slangwise on Twitter.
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