Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

Bullish for Main Street, Bearish for Wall Street

By

Lots of new data on labor market came out this week. I want to run through a few charts on the more important data points. First is the February ISM manufacturing index. The employment component of the manufacturing index surged to its highest level in almost four decades. The last time hiring intentions in the manufacturing sector were this strong was in 1973. The employment component of the non-manufacturing sector was also strong. My chart shows that non-manufacturing employment intentions reached their highest level since 2006. Jobless claims also improved more than expected … [Read more...]

Saudi Stocks Plunge

By

Are investors in Saudi Arabia overreacting to geopolitical turmoil in the region or do they know something we don’t? If the Saudis start a revolt, $100 oil will look cheap. U.S. investors might consider giving the price action in Saudi Arabia a bit more weight. … [Read more...]

The Fed vs. the ECB

By

I wouldn’t trade the U.S. dollar for the structurally flawed euro, at least not yet, but I would gladly trade Ben Bernanke for the more vigilant European Central Bank (ECB) President Jean-Claude Trichet. Take a look at the contrasting views on inflation in the statements below. It should be clear after reading this post which central banker would make a better custodian of the value of the dollar. The first is from Bernanke’s prepared remarks in the Fed’s semi-annual monetary policy report to Congress. Emphasis is mine. The rate of pass-through from commodity price increases to broad … [Read more...]

The Danger Zone

By

With geopolitical turmoil spreading to key oil-producing countries in the Middle East and Africa, oil prices have spiked in the last two weeks. West Texas Intermediate, the key U.S. benchmark, is now trading near $96 per barrel. Brent Crude, the European benchmark, is trading north of $110 per barrel. The increasing risk of an oil price shock has apparently caught many investors off guard. One would have thought that revolutions in Tunisia and Egypt, as well as protests in Yemen, Bahrain, and Algeria, would have alerted investors to the growing risk of a price shock, but they didn’t. The … [Read more...]

Is the Dollar Losing its Safe-Haven Status?

By

In times of geopolitical upheaval, investors traditionally flee to perceived safe-haven assets. Historically, the dollar has been considered a safe-haven. You can see this trend in my chart below. The chart compares the VIX Index (a.k.a the Fear Index), which is a measure of investor risk aversion in equity markets, to the dollar index. Over recent years, increases in the Fear Index have been highly directionally correlated with the dollar index. But the most recent spike in the Fear Index has been accompanied by a falling dollar index. The fear index hasn’t yet spiked to levels comparable to … [Read more...]

The Money Flood Market

By

In case you still thought stock prices were advancing on improving economic growth, take a gander at this puppy. The grey line is the Fed’s securities holdings. You know – all the Treasuries (and MBS) the Fed is buying from Wall Street with freshly printed money. The black line is the S&P 500. Quite a correlation wouldn’t you say? The question that savvy investors should be asking themselves is, “What happens when the Fed stops buying bonds in June?” It could be an unpleasant summer for the unprepared.  … [Read more...]

Home Prices Slide in December

By

The S&P/Case-Shiller Home Price Indices for December were released this morning. Home prices continued their decline in December, falling .4%. In the fourth quarter, home prices fell 1.9% and for the 12-month period ending in December, home prices declined 2.4%. After two home buyer tax credits, multiple foreclosure modification programs, and trillions in support from the Fed, it appears that we have only managed to delay the ultimate bottom in home prices. Home prices are now much closer to a bottom than to the top, but that doesn’t offer much comfort to the homeowners in Las Vegas, … [Read more...]

The Only Variable That Matters

By

This was a busy week for economic data releases. In the manufacturing sector, January industrial production and capacity utilization were released, as were the regional manufacturing surveys from New York and Philadelphia. In the housing sector, data on housing starts, building permits, and homebuilder sentiment were released. January retail sales and inflation data also came out this week. I could run through each of the economic releases and give you the investment implications, but I would be wasting your time. You see, this market is uninterested in economic data. It doesn’t matter that … [Read more...]

An Uber-Bull

By

Call this the uber-bull case for stocks. Laszlo Birinyi is forecasting S&P 2,800 by September of 2013. Laszlo relies on historical patterns to make his predictions and obviously pays little attention to fundamentals. For those of us who still pay attention to fundamentals, Mr. Birinyi’s price target implies a P/E ratio on 2012 operating earnings estimates of more than 23X. The last time the S&P 500 traded at a forward operating earnings estimate of 23X was 1999. We all know how that turned out. … [Read more...]

Criminals Consistently Outflank Regulators

By

The slimier characters in the hedge fund industry will always find a way around the rules. Excessive regulation is not always effective regulation. SEC investigates ETF use in insider trading by Kara Scannell, Financial Times “The Securities and Exchange Commission is investigating whether Wall Street traders are using exchange-traded funds as a means of disguising insider trading…ETFs have emerged as a possible mechanism for maximising gains in one stock while potentially masking trading patterns, people familiar with the matter say…In one scenario, a trader could learn information … [Read more...]