In Case You Missed Them - Some Links of Interest (8/13/09)

Below are some links of interest for 8/13/09, just in case you missed them. Some have already been posted to Twitter.

• Imports were up in June, in part due to a spike in oil prices. Exports were also up in June. On a year-over-year basis, exports are off 22% and imports are off 31% (Calculated Risk).

• The duration of unemployment chart is getting scary, and at record levels (Trader's Narrative). Can you say jobless recovery?

• Statistics indicate a recovery with no jobs, no pay increases, and therefore no increases in tax receipts for struggling state and local governments (Washington Post).

• As of April, less than 13% of the largest 1,100 hedge funds had reached their high water mark, while more than 18% were more than 30% off their peaks (WSJ). Even after the recent market run, more then 70% of hedge funds have not recovered from 2008 losses, making it difficult for firms to generate extra fees, pay bonuses, and retain talent.

• Natural gas hedges that locked into higher prices helped a number of companies report better than expected earnings, but this could be harder in the future if speculators have a more difficult time participating in the market going forward (WSJ). This is certain to affect "cash-flow certainty" for companies, affecting not only their ability to manage risk, but their ability to provide some level of stability to consumer energy prices.

• Even if the efficient market hypothesis does not get in your way, it is not that simple to technically and fundamentally trade your way to being "really" rich, ......., but "merely" rich is possible (Abnormal Returns).

• If revenue growth is to have a V-shaped recovery, shouldn't CapEx spending increase? Zero Hedge looked at the data. Not only is CapEx spending not increasing, it is continuing to fall.

• The Baltic Dry Index has been down nine of the last ten trading days (The Financial Ninja). There is suspicion that China has pretty much completed their commodity restocking.

• World stock market capitalization is up another $4 trillion in July (Carpe Diem).
  

• Are option flash orders the next big thing to worry about (WSJ)? Maybe not (Daily Options Report, here and here).

• Has the no volume bear market rally finally ended? The Pragmatic Capitalist believes so, and lays out the case why. The 50% move in the S&P 500 is somewhat typical for a secular bear market rally - declining volume, low quality asset gains, little leadership, and the move has been swift. With no volume confirmation, negative seasonal trends, no real catalysts in view, and extreme bullish sentiment, the market may be ready for a correction.

• Don Fishback ran some numbers and found that the average return of the S&P 500 during earnings season was -0.11% (Don Fishback's Market Update, HT marketsci tweet). So why are stocks and index options more expensive going into earnings season? It could be explained by how far each period's returns deviate from the average. In fact, market returns during earnings season do not really resemble a bell curve.

• During the second half of July, the NYSE experienced a 10.27% decline in short-selling positions not closed out, while the Nasdaq had a more than a 5% fall in short interest (WSJ).

• In a challenge to iShares, Vanguard has filed a registration statement with the SEC to offer seven bond index ETFs, illustrating in part current trends, and how investors are looking more towards corporate bonds (Bull Bear Trader). While some investors are simply chasing returns, others are looking for new ways to diversify away from equities.

• The natural gas ETF, UNG, has decided to not issue new units on worries of new stringent CFTC rules (WSJ). The shortage of shares may continue to cause the fund's value and price to diverge.

• Actively managed quantitative strategies currently account for 9% of all U.S. equity AUM, as automation is becoming a competitive necessity (FINalternatives).

• A forthcoming academic paper from SUNY professors Greg Gregoriou and Razvan Pascalau suggests that the optimal number of underlying hedge funds within a fund of hedge fund portfolio may actually be as low as 6-10 (All About Alpha). Among other conclusions, the paper demonstrates empirically that the number of hedge funds included in a FoF has a negative and significant impact on the volatility of returns, while having less of an impact on actual returns.

• Bob Prechter of Elliott Wave International is quite sure the next wave down will be bigger and the March lows will break (The Big Picture).

• After calling the bottom in March, Doug Kass is bearish again (TheStreet.com) since cost cuts and fiscal stimulus are limited, cost cuts threaten the consumer, the net worth of individuals has been damaged, the credit shock will continue, the outcome of the Fed monetarist experiment is uncertain, a housing recover will be muted - there are no other drivers right now, commercial real estate is just now entering its downturn, municipalities may not provide the necessary economic stability, and taxes will be rising, along with health and energy bills, further hurting the consumer.

• Money managers collectively have 18.5% of the long portfolios in the Financial sector, 16.8% in Technology (Bespoke Investment Group). Utilities and Telecommunications round out the bottom at 3.0% and 2.9% respectively.

• S&P 500 YTD returns by sector (Value Expectations). Technology, Consumer Durables, and Basic Materials are leading the way with 39.73%, 36.77%, and 32.82% average returns, respectively, while the Financial and Utility sectors are bringing up the rear at average returns of 10.81% and 5.87%, respectively. The Applied Finance Group's Value Expectations (VE) interface provides sector expectations for the S&P 500 (Value Expectations).
  

• From the latest update of the four bear recovery comparison (check out the chart at dshort.com), it appears that the S&P 500 lows in 1974 and 2002 market sustained recoveries. The Dow low in 1929 failed 11 months later. The current market is now 47% above the March 9 low, and has outperformed the 1974 and 2002 rebounds over the same period. Doug Short ask: Will the rally continue to show resilience? That is the question.

• New Morningstar 5-star stocks include Cisco Systems (CSCO), ExxonMobil (XOM), and Regions Financial (RF).

• American Association of Individual Investors (AAII) sentiment survey results (as of Aug 6): Bullish 50% (rose above long-term average of 38.9%), Neutral 14.84%, Bearish 35.16% (rose above long-term average of 30.0%). It looks as if investors are jumping off the fence.

• Even though the Dow Theory is giving bullish signals - since both the Dow Industrials and Dow Transports are moving above previous significant highs, signaling that the primary trend is bullish and stock price are likely to move higher - the signal may not have occurred since the corrections that followed the May and June highs failed to retrace even one-third of the rise since the March lows. As mentioned Monday, Jeff Saut just thinks it is a contrarian indicator.
  

• Points taken from the battle of the Dr. Doom's (Bull Bear Trader) and the recent Nassim Taleb interview on CNBC (Bull Bear Trader).