NEW$ TO U(SE)

The next several months carry better odds for positive equity returns. As Doug Short noted in his ultimate analysis of market seasonality:

November and December tend to end the year on a high note. Together with January, March and April, they’ve combined to inspire the "Sell in May, buy Halloween" strategy. February is the naughty winter month.

This is the simplified chart from RBC Capital Markets

Here is Doug Short’s:

However, be aware that the market is overbought by 2 standard deviations relative to trend:

But what does it really mean?

Note that stocks were  higher in 6 of 9 prior
episodes after reaching a similar technical
extreme.

See my Oct. 29 post: TIMBER?

The bull is still in charge, say America’s money managers in Barron’s latest Big Money Poll. But it pays to be cautious, as bargains are getting harder to find.

Nearly 60% of the professional investment managers responding to Barron’s fall Big Money poll say they are bullish or very bullish about the stock market’s prospects through the middle of next year. That’s the same percentage of bulls as in our spring survey, and a sure sign the pros regarded the market as severely oversold when the Dow Jones Industrial Average fell to 6547 in early March — a 12-year low.

Today’s bullish investors see the major stock indexes making steady progress through next June, amid signs the U.S. economy is on the mend after a searing recession.

What surprises me in this survey:

• 52% of managers polled think there is zero risk of a double dip!!!
• 47% see no rise in US ST rates in the next 12 months!

Full Barron’s article

The WSJ is the best financial newspaper (The FT is second in my view). But financial writers can have a nice sense of humor:

Still undecided on a Halloween costume? Go as a deferred-tax asset. Calyon Securities spooked Citigroup shares Friday when it said Citi might have to take a $10 billion write-down on its $38 billion deferred-tax asset in the fourth quarter, citing a tax expert. That could lop 10% off the bank’s tangible common equity.

Others think a charge unlikely. But, like a bad horror film, this tale could have twists. Citigroup has doubts of its own about the asset. The bank has been talking with the Treasury, to make sure the deferred-tax asset wouldn’t have to be written down due to a "change in control" at the company, according to people familiar with the matter. Such an outcome feasibly might be triggered if Citi’s largest shareholders, including the Treasury, unloaded big chunks of holdings. The very existence of talks suggests Uncle Sam is thinking of reducing its 34% stake.

The Commerce Department reported Friday that consumer spending fell 0.5% in September, the first decline in 5 months. August spending was revised upward to a 1.4% increase vs 1.3%.The decline was largely attributed to reduced car sales a month after the "cash for clunkers" program ended. Spending on durable goods such as cars and other products designed to last more than three years fell 7%, more than erasing gains from a month earlier.

Spending on nondurable goods increased 0.7% and service outlays increased 0.2%.

Incomes were flat in September after a 0.1% August gain, revised from an originally reported 0.2% increase.

The saving rate, or the proportion of income left over after consumption spending and taxes, increased to 3.3% in September, compared with 2.8% a month earlier.

The personal consumption expenditures price index excluding volatile food and energy costs, increased 0.1% in September and was up 1.3% vs last year.

Chart from the NYT

Related post: THE US CONSUMER: BRACE YOURSELF! (Update coming)

Billionaire investor Wilbur L. Ross Jr., said today the U.S. is in the beginning of a “huge crash in commercial real estate.”

“All of the components of real estate value are going in the wrong direction simultaneously,” said Ross, one of nine money managers participating in a government program to remove toxic assets from bank balance sheets. “Occupancy rates are going down. Rent rates are going down and the capitalization rate — the return that investors are demanding to buy a property — are going up.”

U.S. commercial property sales are forecast to fall to the lowest in almost two decades as the industry endures its worst slump since the savings and loan crisis of the early 1990s, according to property research firm Real Capital Analytics Inc. The Moody’s/REAL Commercial Property Price Indices already have fallen almost 41 percent since October 2007, Moody’s Investors Service said Oct. 19.(…)

Ross, the 71-year-old chairman and chief executive officer of WL Ross & Co. LLC, said in an interview on Bloomberg Radio that he would use “extreme caution” before putting money into commercial real estate, especially office space, because properties are losing tenants.

U.S. office vacancies hit a five-year high of almost 17 percent in the third quarter, while shopping center vacancies climbed to their highest since 1992, according to the property research firm Reis Inc.

“I think it’s going to take quite a while to work itself out,” Ross said.(…)

Full Bloomberg article

Related posts:

The Commercial Real Estate Fiasco

Fed Frets About Commercial Real Estate

• Subtracting the effects of stimulus, the real underlying strength of the economy is a mystery.
• The next phase of this cycle will be influenced by the global reaction to the U.S. Administration’s attempt to reflate its way out of the deep recession and export deflation to other countries via dollar devaluation.
• A double dip recession would be a disaster for the already terrible
  fiscal outlook.
• Despite the risks to the recovery in the U.S. economy, and the untenable long term fiscal outlook for the Treasury, our view is that
  the U.S. dollar will continue a relatively orderly decline.
• Policy makers are walking an impossibly thin line between frothy asset
  markets and persistent deflation and deleveraging. There is the clear risk that the authorities will either do too much too soon, or too little too late. But whatever they do, it is likely to be the wrong thing.
• The bull market in global stock markets and commodities remains intact. Looking out 6-9 months, the possibility of another major downleg is increasing. Conservative investors should begin to reduce exposure on market strength.
• Whether you are investing in real estate in China, equities in Peru, or
  indexing the S&P; 500, you are putting your faith in the ability of the U.S. Government to pull off a miracle.

 

http://d1.scribdassets.com/ScribdViewer.swf?document_id=21903421&access_key=key-2i5njtxxmqja77iek7is&page=1&version=1&viewMode=list

(…)The price of a typical home rose 0.4% on a seasonally adjusted basis in October to £162,038 ($267,800) following a 0.9% increase in September and 1.4% gain in each of the two months before that.

But although October’s rise was the weakest of the last six consecutive month-on-month increases, it left prices 2% higher than in October last year, the first annual increase since March 2008.(…)

Although house prices have risen 4.6% over the first 10 months of this year, they remain 13.1% below their October 2007 peak.(…)

The three-month on three-month rate of change of house prices, which is generally a smoother indicator of the near-term trend, dropped back to 3.4% in October from 3.8% the previous month, Nationwide said.(…)

Full WSJ article

Also

Mortgage approvals increased to 56,215 in September from a revised 52,970 in August, the highest level of approvals since February last year. Although that marks a solid recovery from a year earlier, when only 33,419 mortgages were approved, it remains well below the 100,095 mortgages approved in September 2007, when the credit crisis first hit the market.

(…) The euro-zone jobless rate inched up to 9.7% in September from 9.6% in August. Eurostat said 184,000 people joined unemployment rolls across the euro zone in September following a rise of 165,000 in August. That brought the total number of jobless to 15.3 million.

The figures showed that 3.2 million people have lost their jobs in the year to September.(…)

Germany’s retail sales fell in September for the second straight month, down by 0.5% from August, when retail sales posted a fall of 1.8%.(…)

Figures also released Friday by Eurostat showed that in October, consumer prices in the euro zone were lower than in the same month last year. It was the fifth straight month of declines, although the fall in prices eased, to 0.1% from 0.3% in September.(…)

Full WSJ article

The European Central Bank expects inflation rates above zero by the end of the year but price pressures to remain subdued – which is expected by financial markets to mean that its main interest rate will be left at the record low of 1 per cent well into 2010.

Full FT article

Intel Corp. Chief Financial Officer Stacy Smith said evidence is beginning to emerge that corporations are returning to technology spending, although such spending is driven more by the savings offered than by any spending increases.(…)

"In general, what we see is that things are improving," Mr. Smith said. The stimulus package in China has provided a direct boost to the PC market because of the government’s efforts to close the digital divide among its population. And while the European market isn’t yet showing strength, the U.S. market appears to be improving.(…)

Full WSJ article

Following are charts from a September 2009 Change Wave survey on IT spending plans supporting Intel’s findings but not signaling a strong recovery: