Charts today - 200d MA, zero sentiment, corporate bonds, real wages, bitcoin & ebooks

Charts today starts with a key technical indicator which is oft-cited: the 200 day moving average.  This great chart from today's Financial Times indicates that falling below it is not necessarily a very bad thing.  

I noticed on Twitter yesterday evening the CNN Investor sentiment index falling to zero (yes: zero!) which is dubbed as 'extreme fear'.  

I had not seen the second chart above but it was reproduced by The Daily Shot and it does a wonderful job of indicating that the level of concern is lower than even at the time of Grexit in mid 2012.  Fascinating.  Adding to stocks this week (particularly with a bunch of corporate reporting occurring) seems sensible.  

Another market move that is worth noting is in the high yield corporate bond space.  At a time when many sovereign bonds are compressing this is another indication of risk aversion:

I know I have showed charts showing a lack of UK real wages before...but it is a fascinating chart: 

Did you notice that quietly bitcoin has pushed back to c. US$400 (from below US$300 earlier in the month)?

 Finally, interesting to see how advanced in terms of sales e-books are in the US versus some other countries.

Charts today - Scottish referendum, bitcoin, European labour costs

Charts today has to start with the Scottish referendum:

So a UK market and Sterling bounce is happening...but the question for me is how much is kick on from here.  I remain unconvinced that we significantly break 6,800 on the FTSE-100.

Similarly is the £ moving back to the c. 1.70 level against the US dollar of the early summer period?  I don't think so...as indicated by this survey showing the level of the currency is still hurting UK exporters:

I note that bitcoin has suffered a sharp(ish) fall below US$500...

...which is interesting given that QE over a number of years has unsurprisingly made currency inherently less useful as shown by this fascinating chart from The Economist:

Finally, want to see the need for European labour market reform?  (especially in Italy and France)

Charts today - Portugal, debt, emerging markets and bitcoin

Charts today has to really start with a Portugal-related chart given the volatility and influence of events in that market yesterday.

Here's the country's default rate probability.  So...a sharp uptick...but look at that downward risk suppression over the last year.

So it was a relevant move yesterday but either we have not seen anything yet...or it will prove just to be a storm in a teacup.  My view...the only hope is further policy accommodation measures by the European authorities.  Unfortunately that is not guaranteed with, I feel, much more discussions and disagreements to come over the next few months.  So more volatility to come - and volatility measures remain hugely suppressed versus history.  

Reiterating this I noted in a tweet from @RAsquawk that:

'Goldman downplaying Portugal - wont have systemic implications 1) limited asset size 2) low Foreign bank exposure 3) ECB liquidity backstops'

Oh dear...

Debt build up does not help as well...and this is nicely shown by the graphic below.  Guess who has been building up debt and growing more slowly?

So how about the emerging markets.  They have had a different year with some clear local market/currency performance differentials between (say) Brazil/India and China/Russia...

...but despite this emerging market political confidence is rising.  For example - following his geopolitical putsch of earlier this year - Mr Putin is stirring...

'In an interview published on Friday, Putin framed his tour of Brazil, Cuba and Argentina as part of an effort to build a multi-polar world at a time when he is isolated by sanctions over Ukraine and his relations with the West are at their frostiest since the Cold War.  Russia sees strong relations with Brazil as "strategically important" in opposing Western clout, he said, ahead of next week's summit with fellow BRICS nations, which includes China, India and South Africa'

On a similar front, I liked this investment bank report that 'the 20 emerging nations currently only represent less than half of their fair share of the global capital market universe - accounting for only 22 percent of global equity market capitalization, and a 14 percent of the global corporate and sovereign bond markets...However, by 2030, emerging markets' share will increase to 39 percent, and to 36 percent and 27 percent respectively for corporate bonds and sovereign bonds'

And the influence of this?  Well China rises to second place in the global capital markets ladder. Other countries set to climb the capital markets ladder include Saudi Arabia, which will rise to sixth position from 10th, Indonesia, to seventh from 12th and Turkey rising to 10th from 17th by 2030.

The rise and rise of the economic/political impact and influence of the emerging markets remains a huge theme.

As does potentially bitcoin.  What an interesting chart...even if you inflation adjust up the 1995 internet spend.

Charts today - US earnings, the euro, bitcoin, parties and the world cup and the markets...

Charts today...starts with a comment and not a chart!

As the US earnings season effectively draws to a close I picked this comment up from S&P Capital IQ:

 

'Lower than expected outlooks outnumber better than expected guidance by a ratio of nearly eight to one, triple the average over the last 15 years.

Overall, S&P 500 earnings are forecast to rise 7.3 per cent in the second quarter from a year earlier'.

With the forward S&P P/E running in the x14s not the most supportive of comments.  Still it is probably the best of the large developed market zones.  What's that phrase I kept on hearing at the recent San Diego conference I attended?: 'the least dirty shirt'...

I have written plenty on Europe and hope ahead of the upcoming June ECB conference over recent weeks.  I thought these charts - especially the one to the right - indicate the growing consensus that one outcome will be a weaker euro.  I have great sympathy with that...but never want to be too consensual.  So maybe a lot weaker than people think? (Now that would depend on the US Dollar's willingness to rise...)

bitcoin is still alive and kicking as this wallet growth slide shows.  Am still thinking about that whole area...

Finally...what not to do at parties as per the FT letters page...

 

...and what happens to the stock market of the World Cup winners.  Brazil the clear favourites....you have been warned

Charts today: a shocking Greek chart, April is apparently good and why bitcoin is hated and Instagram is loved

Charts today start with this fascinating chart via Zero Hedge on Greece who had plenty of apparent bids for their return to the bond markets yesterday even following recent (and major) bond yield compression. 

 

 

Still April is a positive risk month judging by these numbers from Avondale Asset Management I saw yesterday. 

 Has this influenced by risk behaviour during April?  Not so much...but it is an interesting run and I wonder if quarterly earnings expectations pushed down in order to allow companies to nominally 'beat' have historically had an influence.  All eyes on the earnings season...

bitcoin has pushed down the financial news agenda in recent weeks.  This chart from Coinbase was fascinating with the biggest non-believers those who either know little about the crypto-currency...or those aged 44 plus:

Finally a fascinating generational shift chart on Facebook, Twitter and Instagram. 

 

Source link for the above chart: http://www.statista.com/chart/2121/teens-prefer-instagram-over-twitter-and-facebook/

Charts today - Japan/wages, global manufacturing PMIs and is oil a crowded long?

Lots of focus still on Japan and with the Nikkei flirting again with the 15,000 level it would be easy to conclude that everything is going well...except of course - as I noted yesterday - the Tankan survey was mixed and today's inflation expectations data from the same source always could be viewed dully:

'The BoJ's Tankan survey of more than 10,000 companies, published with new details on Wednesday, showed prices are expected to rise below the 2 per cent target in 1, 3, and even 5 years from now.
Large non-manufacturers had a particularly subdued outlook, anticipating that prices will be rising only 1.2 per cent in half a decade'

(via Fast FT)

The natural extrapolation of this data is that companies are not going to meaningfully boost employee earnings in the current wage round.  We will not really know for a couple of months the full aggregate data but the reaction of the Yen - which has fallen back to near 104 against the US Dollar - says it all.  More stimulus required and this means a lower Yen.

I posted a couple of times yesterday about the manufacturing PMIs in Asia and Europe but this heatmap summarises the world nicely.  Looking at the Markit (as apposed to the ISM US one) statistics what is striking to me is that the US had the highest manufacturing PMI number.  The other striking aspect is the continued falling of the number of 'red' portions in the core PMIs...although a greater number of new export order heatmap strength indicators (especially in Asia). 

Thoughts on this: (1) is the world increasingly dependent on a strong US?  Interesting given the challenges the Federal Reserve are currently facing re communication... Additionally (2) is the benefit of weaker Asian / emerging market exchange rates starting to show through in Asia?  Possibly this may also be linked to a stronger US market / Europe economically 'off the bottom'.  Put all this together though and the world does not feel in rude health. 

A few couple of charts.  Is oil a crowded long?

(On oil I do note the importance of the psychological round number of US$100 as shown below)

And bitcoin is quite volatile still.  I am still interested in bitcoin and like the way that it is making fewer appearances in the press.  It needs a period of consolidation - and abating volatility - to make people/investors reconsider.  I will be posting on it again at some point and will notify if I ever buy any myself. 

 

Three new technology charts i have come across today - bitcoin, social media and mobile

Three interesting new technology charts I came across today. 

bitcoin prices have been volatile recently following the well-publicised Mt Gox issues (see here for a reasonably recent update).  What I noted about the bitcoin price action was that, over the last 24 hours, it troughed at US$500 / a bitcoin.  Interesting round number...  As discussed before, when bitcoin pushes below US$500 and stays there for a couple of days, I will write an update post to this one.  bitcoin still interests me... 

I wrote up Twitter and LinkedIn in recent days (see links here and here), so I thought this chart was interesting.  Proportional interest is rising...but, at least for adults, Facebook remains the default social media site. 

 

Mobile trends have benefited companies like Google in particular as 'on the move' digital consumption booms in the West.  As is often the case though, emerging markets can jump a technological generation as this interesting statistic on India shows

 



The benefits of travel...new charts that said something to me

 

Was travelling for much of yesterday but between appointments, there were opportunities to graze social media and other research sources for some new insightful charts.  Here are a few that said something to me.  

 

 

So inflation finally hit the 2% level the Bank of England has hoped for.  No more of those embarrassing letters to the Chancellor the Exchequer then...

 

The real problem though is the lack of real wage growth in the UK (and the rest of the 'Western' economies).  The Financial Times graphic header may have been 'ending six years of decline in real earnings' but we are not there yet.  Lacklustre recovery even with QE's help over the last few years...I think we know one of the reasons why

And we are still struggling with debt issues.  I was slightly scared by this chart.  If we turn Japanese then buckle down for another decade.  That's what too much accumulated debt and low / no real wage growth leads to.

 

There are no easy solutions...supply-side reform boosting productivity, innovation and competitiveness being one.  I noted some interesting differentials in Europe: Spain versus Italy and the (well-known) difficulty of competing with Germany. 

 

It isn't easy in Europe (and Hollande's Euro50bn spending cut yesterday was just keeping the French deficit in line with EU preferences of a 3% of GDP budget deficit...)

 



 

 

Another 'solution' are corporate mergers.  January 2014 apparently has shown the highest cumulative transaction volume in mergers since 2000.  That's interesting, but I thought this graphic was more insightful (and slightly worrying):

 

 

Finally, bitcoin transactions - abating a little.  As with a share, the volume spike happened with that sharp run-up to US$1000 a bitcoin (currently in the US$800s).  Am still looking at bitcoin, maybe hoping too for further volume compression and movement off the front pages (or a final splurge there after a price fall...)

 



A few interesting charts - bitcoin to jobs to wages to the lights going out (maybe)

Here are a few interesting charts I have come across -

In case you have not seen, bitcoin is a little 'bit' volatile this morning as the People's Bank of China makes some slightly cautious comments about the crypto-currency.  Nevertheless it has been a strong year for bitcoin 'investors'.  Conventional equity indices - here represented by the Russell 2000 - have done rather well too but bonds, emerging markets and commodities have not done so well.  What price gold being rather nearer the top of the rankings next year?

Of course, one of the reasons bonds have been poor is the on-going 'tapering' debate.  The ADP jobs statistics yesterday showed job creation in the US at the best monthly level for a year.  All eyes on the Friday official non-farm payroll statistics now but - unlike many other parts of the world, especially in Europe - the US is creating jobs at the moment.

Is this something to do with the size of government?  The US is down in the bottom left quadrant in contrast to much of Europe. 

Just as scary with the above is that every country below the line is running a budget deficit.  Good time for bond supply (or central bank purchasing routines...)

Talking about scary, look at these revisions in UK real average earnings growth.  No wonder people feel uncertain. 

And will the lights go out too in the UK?  Reserve margin analysis shows that the UK power supply buffer effectively hits zero in 2016.  That's something for government to think about!  The rest of Europe is better although the shutdown of the nuclear plants in Germany is clearly having an impact.  Energy efficiency exhortation plus a hope that renewables become even more cost-effective awaits for all...either that or higher prices which provide incentives to energy companies to invest...which contributes to the crimping of real wages...

(h/t finance_guy)

Buried treasure - the link between losing bitcoins and active fund management

Did you read the story about the IT worker from South Wales who threw away a hard drive at a local dump which contained the thick end of £5m (US$8m) worth of bitcoin virtual keys? As the The Times put it:

'In order to find the drive, he would have to dig through three months' worth of rubbish at the dump'

That has got to hurt.  Like selling your Apple stock when they were down-and-out a number of years back or not being able to put your hands on that lottery ticket when - for once - the numbers aligned.  With a huge site and the passing of time - let alone any decay of the hard drive - that is one difficult buried treasure hunt, even if the rewards are huge. 

In today's world should we be surprised that the IT worker simply forgot?  We are all struggling to process the daily information flow out there.  Three months ago, bitcoin scarcely warranted a mention in even the financial pages and your average investment professional would have not been able to define a 'crypto-currency'.  Today it would be a candidate for finance word of the year. 

Processing the daily information flow is a big challenge for anyone in the investment industry.  As making decisions on money and portfolios correctly needs some time and insight, being able to 'ignore the noise' and focus on the job at hand has become harder and harder.  Throw in macroeconomic uncertainties, unprecedented Central Bank interventions and a changing global geo-political backdrop and is it no surprise that index funds become more and more popular around the world.  Yes there are still decisions to be made when thinking about such products but the information management challenge is much, much less. 

The risk surely though is that you end up knowing more and more about less and less. In a world of seemingly limitless new information from a burgeoning range of sources, getting your hands dirty in the information flow can be exhausting but also extremely rewarding.  That's the buried treasure which can result from active investment selection if you have the nerve, skill and insight to pull it off.  And, as per the rise of the index fund, more people decide not to play, the opportunities are going to get bigger. 

The bitcoin buried treasure probably will never be found but the buried treasure in the markets for active investors is waiting and - with the rise of the index fund - building.  It is all about keeping in the information flow. 

bitcoin - three links on what to think at US$1000+

In the world of bitcoin life has got even more interesting since my first post on the subject ten days ago. 

 

(h/t @ppearlman)

Not only has the price remained parabolic but, at the time of writing, it is getting close to the gold price.

 

 

The only factor seemingly even remotely keeping pace with the bitcoin price...are bitcoin mentions (although even this has broken down over recent days). 

So...what should we be thinking?  A few more links...

I have noted that - as seems to be the trend increasingly in financial circles - China is leading the way on bitcoin demand, just as it is on gold demand (see the latest statistics on this here).  This article notes some of the reasons for this with the observation that:

'China’s bitcoin obsession primarily traces back to two central factors: the difficulty of getting wealth out of China, and the fact that Beijing does not allow the yuan’s value to float freely. Should either of these change, bitcoin’s value could plummet'.

On my original bitcoin link, I highlighted a story centring on the Chinese government's strategic interest in bitcoin because of its potential future role as a global currency.  This story takes that concept a stage further into the day-to-day realities of the nouveau riche Chinese.  So a positive pincer movement from China...at the moment. 


Followers of bitcoin will know that there has been a history of previous 'e-currencies'.  This piece (possible paywall), from the Financial Times provides a good summary.  The key quote from the article is:

'“It appears many digital-currency firms may have underestimated their regulatory obligations, the anti-money laundering risks presented by their business models and the degree of law-enforcement concern surrounding those risks,” Adam Shapiro, consultant at Promontory, wrote in a recent client note.'

For what it is worth, the bitcoin site I have been in contact with requires more than sufficient 'know your customer' information in my view.  My observation is that the crypto-currency industry is learning.  That's a positive.

Finally, I note some growing disputes between fans of different crypto-currencies.  I thought this article made some good points on bitcoin vs Litecoin.  My favourite quote was:

'Speculating on altcoins, in general, is pure greater fool theory in action, because there is no significant fundamental utility, no "improvement delta" over Bitcoin itself'.

The greater fool theory, eh?

I posted this chart at www.financialorbit.com and my Twitter feed on Thursday with the comment that:

'The bitcoin price movement (for those of you with good eyes not quite showing the US$1000 level being attained as it was earlier today) on the right, the price of tulips in the mid 1630s excitement in the Netherlands on the left'. 

 

 (h/t @henri_haguet)

This led to an interesting Twitter exchange (thanks Jon), some excerpts of which are presented below:

From @CapitalJon
So does that mean #Bitcoin is now at #Tulip #Bubble peak or do we have some way to go?
 
From @financial_orbit
a strict application between the interim and ultimate peak suggests that's it...but tulips are tulips whilst is #bitcoin money?!

 

From@CapitalJon

#bitcoin is not money as no backing to it so just form of exchange where market may or may not place a value on it 

From @financial_orbit

in the good old days central banks only used to issue backed money.... The key is what % people should have non paper?

 

From @Capital Jon

Good Question Chris. Are we dealing with a Global Depression Scenario...? What Value has money, gold, silver, diamonds...

 

Paper Money only has Value that People ascribe to it in exchange relative to other Paper Money etc..That is a moving feast!

 

While Paper Money as an IOU may no longer have the Gold Standard Backing it still has Sovereign Obligation to pay.....

 

Paper Money = Sovereign IOU. What is a Sovereign IOU worth? In some cases ZERO! In most cases a % of another IOU or Asset.

 

From @financial_orbit

This is what really interests me. Historically obligation to pay often leads to necessity to inflate. Will bitcoin be different?

 

logical to have in non-property pfolio split of inflation defenders. Crypto-FX maybe one those, equities, gold too. Q is what %?

 

From @CapitalJon

In theory #bitcoin could be different as finite amount but no IOU behind it so totally dependent on value placed on it.

 

#bitcoin dependent on emotional human desire to own and utilize which is never a good recipe for success! Can make you sick

 

From @financial_orbit

Paper Money should always be employed in exchange for productive assets. Money in itself just devalues over time as we know

 

From @CapitalJon

Income producing Assets are the best inflation defenders over time eg property and equities.

 

From @financial_orbit

yes, balance of hope/reality of anti-inflation supply of bitcoin over time. Emperor's new clothes OR the new gold standard?

 

From @CapitalJon

Very funny Chris :-). I think definitely "Emperor's new clothes" it can never be a Gold Standard as cannot be controlled!

 

From @financial_orbit

For gold's sake I hope we never find a King Midas! That would sucker supply...

 

 

So what we are learning is that bitcoin could have a role although factors like China, regulation and human psychology will have an impact.  If you hold gold for its diversification reasons then you are halfway to 'getting' bitcoin.  This is my own view. 

 

Gold or bitcoin at prevailing?  If you pushed me, still gold.  What is the sensible split between gold AND bitcoin assets only in a portfolio.  Probably not 100% / 0%. 

 

Finally a funny.  Not my own view, but it made me laugh. 

 

China loves gold, Europe needs more QE and bitcoin vs Dutch tulips...

Gold has been 'all over the place' recently, but there is a little bit of hope as the price seems to be showing some resistance in the mid 1200s. 

In all the gnashing of teeth about gold's recent move, there has been one constant: strong Chinese demand.  That has continued to grow in October.  The uncorrelated juxtaposition with the gold price...well that's for another posting. 

Gold still looks an attractive risk-reward play to me here, as per the link above.

Turning to Europe, I thought this was interesting from the European Central Bank.  MFIs are Monetary Financial Institutions.  Now it is no secret that the asset base is being squeezed but what I think is really insightful is that after you take out interbank, ECB deposits, credits to governments etc...there is still a big (admittedly 'non-stressed') outflow. 

 

Europe 'naturally' recovering?  Not with the above it is not.  That's why Mr Draghi cut rates.  Next step: some QE catch-up with the Bank of Japan...

Given I believe in gold as an asset class and the need for more QE in Europe (amongst others regions), it is no surprise that I really like the concept behind bitcoin (another posting to supplement this one to come) but this had me in stiches.  The bitcoin price movement (for those of you with good eyes not quite showing the US$1000 level being attained as it was earlier today) on the right, the price of tulips in the mid 1630s excitement in the Netherlands on the left. 

 

 (h/t @henri_haguet)