Archive for Investing

Airlines in America fail in their campaign against the Gulf carriers

By The Economist online

ON MAY 14th the United States and United Arab Emirates (UAE) announced a deal that should, at least in theory, put an end to their long-simmering dispute over what airlines in America allege are unfair subsidies provided by the Gulf state to its two major airlines. News of the agreement had emerged three days earlier, prompting both sides to claim victory. American representatives claimed that the UAE had admitted that it had unfairly subsidised its flag carriers and had agreed not to add further so-called fifth-freedom flights, which are routes to the United States that do not originate in the UAE. (Breitbart News ran a triumphant story under the headline “Trump’s America First Agenda Wins Trade Dispute With United Arab Emirates.”) Meanwhile, the UAE ambassador to the United States argued essentially the opposite, stating that he was “very pleased” that Emirati airlines could continue to add fifth-freedom flights.

So who is right? Mostly, the UAE side. When you look at the real substance of the agreement, it is clear that the American airlines did not get anything they wanted. The main thing they sought was to put an end to those fifth-freedom flights, which cut into their business when Emirates and Etihad, the flag carriers of the states of Dubai and Abu Dhabi in the UAE, fly from their home bases to the United States via places such as Europe. The American carriers got some language they could point to in order to declare victory: the Emiratis stated in the deal that they have no plans to add new fifth-freedom routes. But the American claim of victory rings hollow, because there is nothing to prevent Emirates and Etihad from making such plans in the future.

The Americans also claimed a win because the UAE airlines promised to publish yearly reports on their finances that are up to international standards. The American airlines hope this will force them to fess up to the unfair government subsidies that the Americans think keep their Emirati rivals afloat.

Read more here: Airlines in America fail in their campaign against the Gulf carriers…read more

Category: Business and finance, Gulliver

Interest Rate and Trade Concerns Cast a Shadow Over Stocks

The S&P 500 index has traded in a narrow range for the past month, fluctuating between resistance at its 100-day moving average and support at its 200-day moving average, unable to establish any clear direction. The failure of stocks to push higher can be traced to a variety of concerns, including rising interest rates, trade tensions and signs of slowing global growth. At the same time, a strong first quarter earnings season has kept stocks from falling below their longer-term trend. The net result has been directionless trading, in search of a catalyst to break the stalemate.

We continue to believe that stocks can move higher, as economic growth accelerates from the modest first quarter and earnings growth remains strong, even though the rerating of earnings expectations following the passage of tax reform had been mostly discounted by the January rally. As it turns out, however, actual earnings this quarter are exceeding even those lofty expectations. According to Factset, by the end of March earnings expectations for the first quarter had risen to 17 percent. And as recently as last week, those expectations had edged higher to 18 percent. But now, after some better than expected results mostly from technology stocks, earnings are expected to grow by an astounding 23 percent. It seems unlikely that results that strong had been fully discounted by the January move, but that still has not been enough to pull stocks higher, suggesting that worries over trade and interest rates must recede to lift the cloud over stocks.

GDP and Inflation Ratchet Higher 

Last week we learned that GDP growth in the first quarter grew by an estimated 2.3 percent. And although that result continued the pattern of relatively weak performance to start the year, it was better than the 2.0 percent Bloomberg consensus. Improvements in both trade and inventories from the previous quarter were not enough to offset weakness in personal consumption, particularly in automobile sales. But compared to the 1.2 percent pace of growth in the first quarter of 2017, and 0.6 percent in 2016, this year’s performance looks rather healthy overall.

…read more

Read more here: Interest Rate and Trade Concerns Cast a Shadow Over Stocks

A Victorian survivor in fund management

By The Economist online….

WHEN the Foreign & Colonial Government Trust was launched in 1868, The Economist had its doubts. “The shape is very peculiar,” we worried, adding that “the exact idea upon which it starts has never been used before.” Some of the trust’s promises were “far too sanguine to ever be performed”. Nevertheless, we concluded that: “In our judgment, the idea is very good.”

That turned out to be one of this newspaper’s more successful forecasts. One hundred and fifty years later, the trust is still going strong, having delivered a compound annual return of 8.1%. It now looks after a portfolio of £3.5bn ($5bn), rather than the £588,000 it raised at launch.

In its own way, the trust is an example of how much the financial sector has changed—and how much it has stayed the same. The idea of a pooled portfolio seems commonplace now, but at the time it was revolutionary.

This was the 19th century, when Britain was confident of its worldwide role. The first portfolio comprised 18 overseas bonds, some in markets, such as Argentina and Peru, not ruled by Britain (the foreign element) and some that were, such as New South Wales and Nova Scotia (the colonial). This diversity allowed the trust to offer an initial dividend yield of 6%; not bad given that the prevailing yield on British government bonds was 3.3%.

The 20th century saw not just the decline of empires but the rise of inflation, which made a bond portfolio hazardous to investors’ health. The fund moved into equities in the 1920s; its first holding was in Shell, the oil giant, and the shares are still in the portfolio today. A century after its formation, the fund was almost entirely invested in equities.

Read more here: A Victorian survivor in fund management…read more

Category: Business and finance, Approved, Business and finance, Finance and economics

The real problem with pensions

By The Economist online…

PAYING for pensions is like one of those never-ending historical wars; a confusing series of small battles and skirmishes that can obscure the long-term trend. The latest conflict is in Britain where university lecturers are indulging in strike action over changes to their future benefits.

Let us start by making the long-term trends clear.

1. People are living longer and retirement ages have not kept pace. This increases the cost of paying pensions

2 Interest rates and bond yields have fallen. This increases the cost of generating an income from a given pension pot

3. Private sector employers have reacted to this cost by closing their defined benefit (DB) schemes (which link pensions to salaries) and switching to defined contribution (DC) schemes (which simply generate a savings pot)

British universities have reacted in a similar way; they are proposing switching future benefits to a DC basis. To avoid confusion, this means that past benefits will be unaltered; if you are 50, and have worked for 25 years, you will still have 25 years of DB benefits. But since pensions are deferred pay, it does mean that the total benefits of academics are being cut so one can see why they are upset.

But there is still plenty of confusion, as this piece in the Independentillustrates all too well (to cite just one example, in a piece about workplace benefits, it quotes OECD numbers on state-pension replacement rates). There are three big areas where the debate gets muddled.

Read more here: The real problem with pensions…read more

Category: Business and finance, Buttonwood’s notebook

AK Steel Stock Could Reward Bottom Fishers

Steel stocks have surged higher since hitting 2017 lows in June and look set to challenge rally highs put in place following the post-election buying spree. Ohio-based AK Steel Holding Corporation (AKS Ak Steel Holding Corp AKS 5.88 +3.34%) has lagged badly during the summer bounce but could now play catch-up, joining its peers in a slow but steady uptrend that could last for several years. As a result, getting in on the ground floor could offer outsized returns for bottom fishers with long-term holding periods.

The fate of AK Steel is tied closely to the U.S. automobile industry, with that sector surging higher after Hurricane Harvey flooded Southeast Texas, destroying an estimated 500,000 automobiles that will require replacement in the coming months. Add the possibility of tariffs to protect the U.S. steel industry, and the group has the right chemistry to build on gains through the rest of 2017 and beyond. (See also: AK Steel Earnings and Revenues Beat Estimates in Q2.)

AK Steel could play catch-up, with the hurricane’s destruction generating intense demand for new automobiles. …read more

Read more here: AK Steel Stock Could Reward Bottom Fishers

Category: AKS, SLX

Watch for Triangle Breakouts in These Stocks

The triangle is a useful chart pattern, especially when it occurs in the context of a trend. A triangle is formed when the price makes converging highs and/or lows. It shows that movement in the stock is becoming smaller and provides some areas to watch for a breakout. If the price moves outside the triangle, it is an indication that the price could keep moving in that breakout direction. A breakout that occurs in the same direction as the overall trend is especially noteworthy if looking to initiate a new position. A breakout in either direction is noteworthy if already in a position, as it provides context for whether to keep holding the position or to consider exiting it.

IHS Markit Ltd. stock has had a great year, up 31% in 2017. After peaking in June at $47.92, the stock has been moving in a triangle pattern. The rising trendline (bottom of the triangle) intersects near $46 – therefore, a drop below that level, especially a closing price, would signal a downside breakout. A rally above the upper trendline at $47 would imply an upside breakout. The height of the triangle at its widest point is $4.58 (it then narrows). This can be added or subtracted to the breakout point to provide an approximate target point. If a downside breakout occurs, the target is $41.42, while an upside breakout would target $51.58. (See also: Corporate Inversions: IHS and Markit Merge.)
These charts show triangle patterns, and breakouts could signal the price direction for the next few weeks. …read more

Read more here: Watch for Triangle Breakouts in These Stocks

Category: INFO, DPS, QSR

3 Short Plays If NAFTA Crumbles

President Donald Trump has renewed his threat to kill NAFTA after criticizing Canadian and Mexican positions in ongoing negotiations. Many Wall Street analysts believe that the United States has more to lose than its northern or southern neighbors if the president follows through, as ending the trade agreement could trigger steep declines in a broad swath of publicly traded issues that depend on north-south trade for their quarterly and annual revenues.

Three potential short sale plays stand out if NAFTA collapses, but given mixed messages from the White House, no one knows when sell signals will go off. Even so, now is the right time to identify profitable strategies – not after a Tweet or executive order sends shockwaves through the U.S. financial markets. Railroads, auto manufacturers and truckers look like the biggest losers should NAFTA collapse, in turn shining a bearish light on the broader transportation sector. (See also: Tips for Trading the Dow Jones Transportation Average.)

These stocks could sell off if President Trump follows through on his threat to terminate the trade agreement. …read more

Read more here: 3 Short Plays If NAFTA Crumbles

Category: KSU, F, JBHT

Immunomedics Stock Breaks Out, Consolidation Likely

Immunomedics, Inc. shares have soared more than 40% over the past five sessions after preliminary data from its Phase 2 clinical trial showed a positive treatment effect. Patients that received a weekly dose of labetuzumab govitecan experienced median progression-free survival of between 3.6 months and 4.6 months, depending on the dosages. These figures were better than competing therapeutics that have achieved regulatory approval.

Given the stock’s multi-day run-up, traders could see some profit taking on Tuesday and Wednesday as early traders lock in profits. The good news is that many analysts were bullish on the stock even prior to these new Phase 2 results. For instance, Cowen & Co. analysts indicated that IMMU-132’s biologics license application (BLA) is on track. The analysts expect an update in the second half of the year while maintaining a robust $15.00 price target on Immunomedics stock. (See also: Immunomedics Breaks Out, but Will It Last?)

Immunomedics shares broke out to fresh highs, but some consolidation is likely given the five-day run-up. …read more

Read more here: Immunomedics Stock Breaks Out, Consolidation Likely

Category: IMMU

Biogen Stock Is Ready for a Breakout

A 2.78% percent loss this year for shares of Biogen Inc. (BIIB​) was accompanied by overwhelming institutional selling, thus leading this stock to underperform. But now it looks like the tide may have shifted in favor of institutional buying.

When looking for the strongest candidates for long-term upside, it often pays to look at companies with a history of solid fundamentals and then take advantage of their recently struggling prices.

Biogen, a biotech company in a leading sector with a strengthening technical chart, makes a strong case for bullish investors. For MAP, the strongest indicator of positive price momentum is by measuring potential institutional accumulation. Last month we flagged a potential institutional buy signal in Biogen, which is notable since prior to that signal there were six potential institutional sell signals for the year. We want to see evidence that the tide may be turning in favor of institutional buying when looking for new bullish candidates. In the chart below, Biogen recently shifted away from overwhelming distribution, and may start to see increasing accumulation.

Source: Tradingview.com

MAP’s process focuses on identifying companies with healthy fundamentals accompanied by outsized unusual institutional activity to try and measure potential accumulation/distribution at the single-stock level. By studying these data points we can hypothesize which equities institutions are trafficking in and marry this information with fundamentally sound companies. We want the odds on our side when looking for the highest quality stocks.

Many of the best-performing stocks over the years have exhibited continual institutional support, telling a story of where big firms may see opportunity. A company, like Biogen, which resides in a strong sector, is growing its revenues and growing its earnings, which may keep institutions holding for years to come.

When deciding on the strongest candidate for long-term growth, we consider many technical areas important to success with a few for Biogen being:

  • Recent three-month closing highs achieved ($295.61 on July 26)
  • Three-month outperformance vs. the overall market (+~17.3% vs S&P 500)
  • Three-month outperformance vs. the sector (+~14.5% vs XLV)
  • And most importantly, institutional support

Institutional investors are showing buying signals for Biogen stock. …read more

Read more here: Biogen Stock Is Ready for a Breakout

Category: BIIB

3 Charts for Navigating the Commodities Market

Investor sentiment toward commodities over recent weeks has been mixed due in part to heightened volatility and shifting fundamentals. In this article, we dig into the charts of key funds from different segments of the commodities market to determine the best trade setups heading into September. (For more, see: Commodities: The Portfolio Hedge.)

Commodities Market Performance

One of the most popular exchange-traded funds (ETFs) used by investors for gaining exposure to a diversified basket of commodities is the iShares S&P GSCI Commodity-Indexed Trust . Fundamentally, the holdings span energy, agriculture and metals. Taking a look at the chart, you’ll notice that the 50-day moving average crossed below the 200-day moving average in April, which is known as a death cross (shown by the red circle). This common technical sell signal is usually used by active traders to mark the beginning of a long-term downtrend. This chart is also a textbook-style example of how the price of an asset generally behaves near a major level of resistance such as the 200-day moving average after a major sell signal has been triggered. Traders would expect this resistance to continue over the months ahead and will likely hold a bearish outlook on the general commodities market until the price rises above resistance. (For more, check out: Major Resistance Levels Suggest Commodities Are Headed Lower.)

Energy

With the fund’s overweight position in energy commodities, it is unsurprising that the pattern of GSG closely matches that of the PowerShares DB Energy Fund (DBE). As you can see below, the bearish crossover between the long-term moving averages signaled a significant move lower for those who utliize technical analysis. The bulls have been unable to reclaim the momentum since the retest of resistance in May, and the recent run back toward $12.40 has many technical traders eyeing another move lower. Traders will likely maintain a bearish outlook on energy until the price of the DBE ETF closes above the combined resistance of the descending trendline and the 200-day moving average. (For more, see: 3 Charts That Suggest Commodities Are Headed Lower.)

Gold

From the perspective of an active trader, the most bullish chart in the commodities markets at the moment belongs to gold and gold-related ETFs. Taking a look at the chart of the PowerShares DB Gold Fund (DGL), you can see that the price is trading within the confined range of a rectangle pattern. The defined levels of support and resistance create easy-to-identify levels for order placement. The break above the long-term averages and the subsequent run toward the upper trendline now suggests that the bulls are taking over. After a few more strong closes, it would not be surprising to see a significant move higher. (For further reading, check out: Active Traders Are Turning Bullish on These Commodities.)

 

Major resistance on broad commodities-related funds suggests remaining selective. We look at one commodity that could be worth buying. …read more

Read more here: 3 Charts for Navigating the Commodities Market

Category: GSG, DBE, DGL

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