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11Aug2015 Market Close: Markets Rise From Earlier Lows, But Close Deeply In The Red, Oils Still Retreating, Some Investors Talking About Throwing In The Towel

Written by Gary

Markets made a feeble recovery of less than a half percentage point by the close. Some analysts are afraid that a weaker yuan will set off deflationary 'ripples' and slow the pace of Fed rate increases.

Although short term indicators are very bearish, tomorrow could be an up day after looking at some closing technical indicators.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

GM's Cadillac targets 500,000 annual global vehicle sales by 2020

(Reuters) - General Motors Co luxury brand Cadillac aims to increase its annual sales to half a million vehicles worldwide by 2020 from an expected 275,000 this year, Cadillac's top executive said on Tuesday.

Greece and lenders agree bailout, shares rally

ATHENS (Reuters) - Greece and its international lenders reached an 85 billion euro bailout agreement on Tuesday after nailing down the terms of new loans needed to save the country from financial ruin.

Tuesday Humor: It's Called The "Dumb Money" For A Reason

Something tells us the "CNBC Oil Outlook Survey" was not exactly scientific. Or perhaps it was double scientifically-adjusted.

CNBC flashback June 4, 2015: Has oil hit its low for 2015? Well, ofcourse yes! #Oops. pic.twitter.com/Xl52i9cTbl

â€" GreekFire23 (@GreekFire23) August 11, 2015

Whatever it was, it is proof that getting one's investing advice from the dumb money is probably not a good idea.

h/t @GreekFire23

What Happened When One Company Set A Minimum Wage Of $70,000

Submitted by Jonathan Newman via The Mises Institute,

Dan Price, the CEO of Gravity Payments, took a $930,000 pay cut to raise the minimum salary of his employees to $70,000. The plan was announced in April 2015, and set to be completed over the course of three years. Both his employees (especially the ones with a larger pay increase) and proponents of income equality celebrated the move. It garnered considerable publicity and rippled through social media, with mostly positive but some negative reactions.

In the New York Times piece that reported on people's initial reactions in April, they quoted Rush Limbaugh calling it "pure, unadulterated socialism," and an economist from the American Enterprise Institute saying "A lot of people have the sense that this may work for this one firm, but it is nothing we should take general lessons from." Another economist from the Stanford University Hoover Institution took a different stance and predicted, "This is going to be great for his business."

As usual, most of the praise and uproar from the respective proponents and critics are either wrong or right for the wrong reasons (if there's not already a name for this phenomenon, there should be). But we can say this even without the benefit of hindsight, which has shown that the CEO's actions have had some negative consequences he did not anticipate.

The Strategy Backfires

The . . .

Even The Dumb Money Is Dumping Stocks Now

Late in June, BofAML noted with some alarm that during the previous week, "clients were big net sellers of US stocks in the amount of $4.1bn, following four weeks of net buying." "Net sales were the largest since January 2008 and led by institutional clientsâ€"after three weeks of net buying, institutional clients' net sales last week were the largest in our data history," the bank's Jill Hall continued.

A little over a week later, Bloomberg reported that some two years after Leon Black's "sell everything" call, "other private-equity firms are following suit - dumping stakes into the markets at a record clip."

Whether that particular bout of smart money dumping was simply an effort to get out ahead of what threatened to be a rather ugly conclusion to six months of bailout negotiations between Greece and creditors, or perhaps a knee-jerk reaction to the harrowing unwind that was unfolding in China's half dozen backdoor margin lending channels we can't say for sure, but what we do know is that not only is the smart money (still) selling, but now even the dumb money has joined the party for the second consecutive week.

From BofAML

Clients swing from pro-cyclical to anti-equity

Last week, during which the S&P 500 was down 1.3%, BofAML clients were net sellers of stocks for the third week, in the amou ...

Credit Suisse in talks to settle 'dark pool' allegations: WSJ

(Reuters) - Credit Suisse Group AG is in talks to settle allegations related to its Crossfinder "dark pool" trading venue, which could result in a fine running in the high tens of millions of dollars, the Wall Street Journal reported, citing people familiar with the matter.
< ...

After The Chinese Devaluation, Who's Next?

Via Credit Agricole's Valentin Marenov,

In a surprise move overnight, the PBOC devalued the CNY by most on record, sending Asia G10 and EM currencies lower.

The selloff seems driven by concerns that the FX boost to the Chinese international competitiveness would affect other manufacturing exporters while pricier commodities could dampen Chinese demand for Australian and NZ exports.

On a broader level, the devaluation signals PBOC's eagerness to join the global currency wars. With the competitive devaluation by various central banks gaining momentum but global trade slowing, the latest CNY devaluation could be seen as likely to force other central banks to consider similar measures before long. Yet another consideration here should be the impact of the PBOC actions on the capital outflows from China.

If the outflows were to intensify after the CNY tumble, the erosion of central bank's FX reserves should continue and add to concerns about insufficient future sovereign demand for global assets. In turn this should continue to boost risk premia in the global bond and stock markets.

* * *

One currency that so far has successfully weathered the storm has been JPY.

We doubt that JPY could decouple from the selloff in Asia FX for too long, however. The CNY devaluation comes on the back of disappointing trade data out of China (Japan's main trading partner) and highlights that the external conditions for Japanese exporters could deteriorate further.

All this adds to the list of BoJ's worries that already includes the stubbornly low Japanese inflation and casts doubt over ...

Buffett's biggest deal casts light on pension burden

NEW YORK (Reuters) - Growing pension obligations at Precision Castparts Corp , which Berkshire Hathaway has agreed to buy for $32 billion, highlight an issue that large U.S. corporations still face, almost a decade into a low-interest rate environment.

Fueled by low pump prices, U.S. motorists to drive more in August: survey

NEW YORK (Reuters) - Roughly one in three U.S. motorists expect to drive more in August as low gasoline prices help fuel optimism for the broader economy, a new retail survey released on Tuesday shows.

Wall St. down 1 percent as cheaper yuan hits commodities

(Reuters) - All three major U.S. stock indexes were down more than 1 percent on Tuesday for the first time in over a month as China's surprise devaluation of the yuan stoked fears about the health of the economy and pressured commodity-related stocks.

Symantec to sell Veritas for $8 billion to focus on security software

(Reuters) - Norton antivirus software maker Symantec Corp has agreed to sell its data storage unit, Veritas, for $8 billion to a group led by Carlyle Group LP as it seeks cash to turn around its core security software business.

Japan National Debt Rises To New Record ¥1,057,224,000,000,000

The first half of 2015 saw Japan's national debt rise at its fastest pace in four years, hitting a new record high at ¥1.057 Quadrillion!! Have we reached Keynesian nirvana yet? Or is just a little more "what difference does it make" debt-fueled fallacy going to fix it all?

Source: Japan Times

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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