The simple strategy of identifying the major trend and then holding on through the bumps paid off handsomely in 2013. With just one day of trading left, the broad market is sitting on a total return north of 30%. But all good things do eventually come to an end. By the look of the trend it is hard to think that end is immediately upon us. Later in 2014, however, may be a different story. Indeed, even several technical issues – lagging small stocks and deteriorating market breadth, for instance – have been resolved. The Russell 2000 index of small company stocks may not be leading the market, but it is at least keeping up with it again. And the NYSE advance-decline indicator, which keeps tabs on the number of stocks going up and down each day, has moved to fresh 52-week highs. For me, the big problem is sentiment. I've written here about very high levels of bullishness among investors and traders and very low levels of bearishness. What constitutes too much bullishness and too little bearishness is up for debate, but at some point the giddiness will reach the critical level where theoretically everyone interested in buying stocks has already done so. Without fresh demand, it will be difficult for prices to advance any farther. Extremely bullish sentiment also leaves the market vulnerable to a shock that could cause people to try to sell into this vacuum of demand, leading to a steep and swift decline. Last week, bearish sentiment according to the Investors Intelligence survey of financial advisors dipped to 14.1%. This is the lowest level in more than two decades in terms of the dearth of bears and in the ratio of bears to bulls. This does not mean the market is about to tank but it should keep us alert for the first true sign of trouble. The long-awaited market correction can easily catch everyone napping under such extremes of sentiment. Let's move to the big picture to see where the market is now and what that might mean going forward. The Dow Jones Industrial Average broke out from seven-month trading range in mid-November and based on the size of the range the implied upside target is roughly 16,750 (see Chart 1), up from around 16,490 Monday. This is simply the height of the range projected up from the breakout point. In early December, prices backed down to once again touch the top of the former trading range in what technicians call a "test" of the breakout. If demand for stocks swells, which it did, the breakout holds and prices move back up. The odds that the upside target will be achieved increase. The target is also in line with the top of the rising trend channel that has defined the market since the major low in October 2011. A rising trend channel is just a trendline drawn through significant lows and a parallel line drawn through significant highs. For the Standard & Poor's 500, pundits have seen many bearish patterns on long-term charts from triple tops to expanding triangles (see Chart 2). None seem valid given the size of the current bull market from the 2009 low because it has stretched those patterns beyond what seems reasonable. In other words, the current rally invalidated them and that is good news for long-term bulls. But it would also be premature to call the action in 2013 a breakout from a 20-year trading range. One of the events I have noticed over my career is that breakouts that occur after strong moves are prone to failure. These momentum-based breakouts, where trends are already in effect before resistance is broken to the upside, are often just temporary overshoots of that resistance. What can cause such a self-propagating trend? Extreme bullish sentiment. Nobody wants to be left behind, and so investors buy at any price, even if indicators flash warnings. Sooner or later, however, the market will correct. As the Dow did with its shorter-term pattern, the S&P 500 can suffer a sharp decline, perhaps down to 1,550, in round numbers, to test its breakout above its 2000 and 2007 highs. If that happens, we'll have to see if demand swells again and prices hold that level. If so, it could be the great buying opportunity for which many savvy investors are waiting. It would also be the confirmation of the start of a secular bull market that can last for several years. The problem is that this scenario calls for a good deal of pain beforehand. To sum up, the Dow has some unfinished upside business in the short-term and that is good for stocks in general as 2014 begins. However, in an environment of extreme bullish sentiment, the S&P's long-term breakout seems to be in need of rest, if not outright correction. If it successfully holds 1550, give or take a few dozen points, then stocks will be in good shape for a very long time.
NYC Mayor Bloomberg signs bill prohibiting e-cigarettes in same places that regular cigarettes are banned
Closing Market Summary: Stocks End Flat
The S&P 500 ended flat after spending the entire session inside of a four-point range. The quiet trading day did little to upset the S&P 500's return for the year as the index will enter tomorrow with a 29.1% year-to-date gain.
Interestingly, while the S&P 500 was challenged by its flat line throughout the session, the Dow Jones Industrial Average held just above its unchanged level for the duration of the day. The price-weighted Dow saw 19 of its 30 components finish in the green, but shares of Disney (DIS 76.23, +1.88) stood out with a 2.5% gain. The noteworthy strength ensued after Guggenheim upgraded the stock to ‘Buy' from ‘Neutral.'
Fittingly, Disney also provided a measure of support to the discretionary sector (+0.4%), which ended ahead of the remaining nine groups. Retailers and homebuilders factored into the sector's strength as the SPDR S&P Retail ETF (XRT 88.01, +0.44) and iShares Dow Jones US Home Construction ETF (ITB 24.68, +0.07) added 0.5% and 0.3%, respectively.
The discretionary sector was the only area of strength among cyclical groups. The materials sector (+0.04%) eked out a slight gain, but had a limited impact on the broader market due to its small size. Meanwhile, the two top-weighted sectors—financials (-0.1%) and technology (-0.1%)—posted modest losses.
Another growth-sensitive sector, energy (-0.8%), spent the entire day at the bottom of the leaderboard while crude oil fell 1.1% to $99.20 per barrel.
Countercyclical groups fared a bit better as consumer staples (+0.3%), health care (+0.2%), telecom services (+0.04%), and utilities (+0.3%) all posted modest gains.
On a stock-specific note, Twitter (TWTR 60.51, -3.24) endured another rough session after falling 13.0% on Friday. Shares of the social media company slid 5.1%, which narrowed its December gain to 45.6%.
Even though the major averages ended little changed, volatility protection was in demand as the CBOE Volatility Index (VIX 13.53, +1.07) posted its second consecutive gain.
Trading volume was well below average as only 452 million shares changed hands on the floor of the New York Stock Exchange.
The bond market proved to be a one-way street today as Treasuries rallied throughout the session. The 10-yr yield slipped three basis points to 2.97%.
Today's economic data was limited to November Pending Home Sales, which ticked up 0.2% while the consensus expected an increase of 1.5%.
Tomorrow, the October Case-Shiller 20-city Index will be released at 9:00 ET, December Chicago PMI will be reported at 9:45 ET, and the December Consumer Confidence report will cross the wires at 10:00 ET. • Nasdaq +37.6% YTD • Russell 2000 +36.6% YTD • S&P 500 +29.1% YTD • DJIA +26.0% YTD
OGX Petroleo e Gas Participacoes SA Given 15 days by ANP to pay for backwork or could get kicked out of concession
- Oleo e Gas Participacoes SA--formerly known as OGX Petroleo e Gas Participacoes SA--owes 73 million Brazilian reais ($31 million) for its 40% share of work done at the BS-4 offshore exploration block, which includes the Atlanta and Oliva oil fields, QGEP said. QGEP operates the block with a 30% share, while closely held Barra Energia retains the remaining 30%.
- In a regulatory filing, QGEP said that it had received notice from Brazil's National Petroleum Agency, or ANP, that Oleo e Gas had been ordered to prove that the company had complied with its obligations under the concession contract. Oleo e Gas faces having its rights to the concession revoked if it fails to meet its obligations, according to the filing.
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BN 12/30 15:30 *CITYJET FRANCE PILOTS CALL FOR UNLIMITED STRIKE FROM JAN. 2
+------------------------------------------------------------------------------+
CityJet France Pilots Call for Unlimited Strike From Jan. 2 2013-12-30 15:33:44.14 GMT
By Francois de Beaupuy Dec. 30 (Bloomberg) -- Pilots unions say they oppose Air France’s plan to sell CityJet to Intro Aviation under proposed terms.
Link to Company News:{2830269Z GR <Equity> CN <GO>} Link to Company News:{AF FP <Equity> CN <GO>}
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To contact the editor responsible for this story: Francois de Beaupuy at +33-1-5365-5051 or fdebeaupuy@bloomberg.net
Tokyo Shares Finish Best Year Since '72
Nikkei Closes at 6-Year High, Up 57% for 2013
TOKYO—Tokyo shares finished at their highest closing level in six years on the last day of trading in 2013, capping a stellar performance for a year that has seen the benchmark Nikkei Stock Average surge 57%.
A weaker yen has helped fuel share prices over the last 12 months by boosting exporters' profits, while expectations for the economic program of Prime Minister Shinzo Abe have also helped strengthen appetite for risk amid a brightening outlook for the global economy as the U.S. recovery gains traction.
Mirroring the trend through 2013, a rise in the dollar to a fresh 5-year high against the yen on Monday helped the Nikkei add 0.7% to end the year at 16291.31, its ninth consecutive rise and highest closing level since Nov. 2, 2007. The 57% gain over the last 12 months made it the best single year for the benchmark since 1972.
An aggressive monetary easing program by the Bank of Japan, 8301.TO +3.62% with Mr. Abe's backing, has pushed the dollar up 21% against the yen over the past year alone. As of the close of Tokyo Stock Exchange trading at 0600 GMT Friday, the pair stood at ¥105.30. The dollar was still under ¥87 at this time in 2012.
The greenback's decisive break through the key ¥105 level over the weekend kept buying pressure alive in the stock market on Monday despite the traditional year-end trading slowdown, with exporters such as Kyocera adding 1.4% and Mitsui Fudosan 8801.TO +2.02% leading real estate shares with a gain of 2%.
Exporters benefit from being able to sell goods more cheaply overseas with a weaker yen, while land developers profit from inflation expectations, a key component of the push to reverse the country's long-standing deflationary trend.
"Although the Nikkei remains top heavy, there are no domestic or global downside risks immediately ahead," said Junya Naruse, chief strategist at Daiwa Securities. He also noted that sell pressure from Japanese retail investors' has lessened as the deadline to take advantage of lower tax rate on capital gains and dividends has already passed.
Japan's capital gains tax is set to rise to 20% from 10% from Jan. 1. Traders could benefit from the lower rate until Dec. 25.
But the start of newly created tax-sheltered NISA individual savings accounts also provided a convenient year-end push for the market. Players could lock in a zero tax rate for their accounts starting on Dec. 26.
"Going into the New Year the market will likely remain firm with the overall uptrend remaining intact on the back of the strong dollar and a strong U.S. stock market," said Yoshihiro Okumura, general manager for research at Chibagin Asset Management.
"The outperformance of financials and real estate shares shows that expectations for ongoing monetary easing and strong demand remain high," he added.
"Japanese stocks will continue to trade inversely to the yen, as has been the pattern for most of the past year," said David Baran, co-chief executive officer at Symphony Financial Partners, a Japan-based hedge fund with over $300 million in assets. He expects to see the dollar in the ¥110-¥115 range in relatively short order.
"If the Japanese government can just do a few things to make global investors feel progress is being made with the restructuring efforts that Japan needs—such as lowering trade tariffs, cutting corporate taxes, and getting more women into the workforce, it could lead many foreign investors to raise their exposure to Japan stocks," he said.
Foreigners currently comprise about two-thirds of Japan stock trading by value, TSE data show.
March Nikkei 225 futures closed up 120 points, or 0.7%, at 16320 on the Osaka Securities Exchange
Peru Expects Record 2014 Mining Investment
President Humala Made Statement in Television Interview
LIMA, Peru—As companies develop new projects expected to boost the country's mineral output, Peru is expected to see a record inflow of mining investments in 2014, President Ollanta Humala said.
Mr. Humala said in a year-end television interview that mining investments are expected to total $14 billion next year, which would be an annual record.
The mining sector is an important source of private-sector investments in Peru, one of the world's biggest producers of base and precious metals. In 2012, Peru's mining investments totaled a record $8.6 billion. Mines and Energy Minister Jorge Merino said recently that mining investments this year will be greater than in 2012.
Peru has a pipeline of mining projects worth some $55 billion. New projects are expected to more than double Peru's copper production by 2016, according to the government. Peru is the world's third biggest producer of copper. It is also a major producer of gold, silver, and zinc, among other minerals.
Economists say the increase in mineral production will support Peru's economic growth over the next few years as metal prices have weakened. Peru's economy has slowed this year in large part due to lower metal prices, which have hurt exports.
Large-scale mining projects being developed in Peru include Glencore Xstrata GLNCY +0.23% PLC's $6 billion Las Bambas copper deposit, a $4.4 billion expansion at Sociedad Minera Cerro Verde SAA, and HudBay Minerals Inc. HBM.T +0.35% 's $1.8 billion Constancia project.
Government officials also expect companies to restart work at a number of projects that have been put on hold due to community opposition. In December, officials said that Southern Copper Corp. SCCO +1.43% could receive government approval for its delayed $1 billion Tia Maria project in the next 90 days and start construction in the second quarter of 2014.
Work at Newmont Mining Corp.'s NEM -1.04% majority-owned Minas Conga copper and gold project, which will require investments of $5 billion, could also restart in 2014, government officials said recently.
Violent protests against Minas Conga in 2012 led the company to suspend work on the construction of the mine. The company is currently building water reservoirs that it hopes will help it win over local support by ensuring communities' water supply.
The conflict over Minas Conga's was one of President Humala's main challenges during his first year in office. The successful development of the project would be a victory for Mr. Humala's administration and a sign that his government is able to resolve community opposition that has delayed billions of dollars in mining investments.
During the interview, Mr. Humala said he backs the development of Minas Conga, but stressed that his government is more focused on helping residents in Cajamarca by developing infrastructure and providing social programs.
"For me the people are more important," Mr. Humala said. "Conga is trivial in the history of the country."
Bears had a tough 2013. Too much went disappointingly right. Equities rose globally. The eurozone failed to fall back into crisis. Squalls in emerging markets faded. After initial missteps, the US Federal Reserve calmed investors’ worries about its plans to scale back, or taper, its asset purchases.
Even if markets ended the year in bullish mood, however, there is plenty that could go wrong in 2014. The share rally is based on expected, not actual, profits growth, but economic prospects remain fragile – especially in stressed European regions. The Fed has to gauge its tapering so as not to stall the US recovery, or shock emerging markets. And that is before all the unknown events that could throw up unexpected crises.
Top of many known worries lists is that the Fed’s control of events will slip. “The biggest risk for 2014 is definitely the risk of the Fed getting it wrong,” says Didier Saint-Georges, investment committee member at Carmignac.
US Treasury yields have risen this year but bond market volatility has been low. Mr Saint-Georges warns: “What is kept artificially stable is often what is most risky. It’s like the turkey analogy; a turkey that is fed regularly in the run-up to Christmas turns about to be the least safe bird of all.”
Mohamed El-Erian, chief executive of Pimco, worries about a mishap as central banks switch from “policy-induced growth to higher, durable and more inclusive private sector-led growth . . . In each case – that of the Fed, the European Central Bank and Bank of Japan – the policy transition is complex. It involves changes in an already highly experimental policy mix.”
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Switzerland Says Khodorkovsky Given Schengen Visa for 3 Months 2013-12-30 14:52:21.786 GMT
By Catherine Bosley Dec. 30 (Bloomberg) -- Swiss foreign ministry spokeswoman Sonja Isella comments in e-mailed statement. * Swiss foreign ministry declines further comment on Mikhail Khodorkovsky’s visa, citing privacy concerns
For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>
--Editor: Paul Verschuur
To contact the reporter on this story: Catherine Bosley in Zurich at +41-44-2244134 or cbosley1@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at +44-20-7673-2841 or cstirling1@bloomberg.net
NL Industries (NL +4.6%), Kronos (KRO +2.6%) and Valhi (VHI +2%) are higher off the open following death of Chairman Harold SimmonsHarold Simmons, Corporate Raider and GOP Contributor, Dies at 82
2013-12-30 07:23:50.21 GMT
By Brendan Coffey and Patrick Chu
Dec. 30 (Bloomberg) -- Harold C. Simmons, the Texas
corporate raider nicknamed the “Ice Man” after structuring
leveraged takeover bids using junk bonds in the 1970s and ’80s,
has died. He was 82.
Texas Governor Rick Perry and state Attorney General Greg
Abbott confirmed his death in separate statements. Simmons was
hospitalized at Baylor University Medical Center in Dallas two
weeks ago and died on Dec. 28, according to the Dallas Morning
News, citing his wife, Annette. The cause of death wasn’t
disclosed.
Simmons supported Republican Mitt Romney in the 2012
presidential election and gave more than $15.7 million to
Republican super-political action committees in that contest
cycle, according to Bloomberg News. He was known for his
charitable giving as well, donating $177 million to the
University of Texas Southwestern Medical Center; in all more
than $400 million to medical and educational causes, mostly in
Texas.
“Harold Simmons lived the American dream,” Abbott said.
“His path began with the purchase of a small drug store, and
through hard work and the free enterprise system, he was able to
turn that investment into one of the greatest American success
stories of all time.”
Simmons was born during the depths of the Great Depression
to two schoolteachers in Wood County, Texas, in a home without
electricity or plumbing. After graduating Phi Beta Kappa from
the University of Texas, where he earned a master’s degree in
economics and played basketball, he worked as a bank auditor
before buying his first drugstore in Dallas in 1960 for $5,000
cash and a $95,000 loan.
Use of Leverage
Over the next 12 years, he turned it into a 100-store chain
scattered across Texas, with a boost from an $18 million
leveraged buyout of Ward’s Drug Store in 1969. He sold the chain
to Eckerd Corp. in 1973 for more than $50 million.
Subsequent deals, such as his investment in titanium
products maker Valhi Inc., typified his ability to recognize
underpriced assets and exploit his adeptness for numbers and
finance, skills that led him to the forefront of the leveraged
buyout craze of the 1980s.
Over the years, he owned a sugarbeet processor, a savings
and loan and fast-food restaurants. He made headline-generating,
if unsuccessful, bids to buy defense contractor Lockheed Corp.
and Pacific Southwest Airlines.
“They call me a takeover artist and make you think I come
and steal something,” he told D Magazine in a September 1982
profile. “Hell, I offer to buy that stock at a higher price
than anyone else will pay.”
Billionaire Ranks
Simmons’s net worth rose to $8 billion in 2013, according
to the Bloomberg Billionaires Index. He was the 158th richest
individual in the world when he died and the 56th wealthiest in
the U.S., according to the daily ranking.
He was the owner and chairman of Contran Corp., a closely
held company that controlled a number of industrial businesses,
including Kronos Worldwide Inc., the world’s largest mining
operation of ilmenite, the raw material used for titanium
products such as white pigment titanium oxide and titanium metal
products. Through NL Industries Inc., he produced security
products, ball bearings and ergonomic desk equipment. Valhi, his
biggest holding, owns Waste Control Specialists, a 1,338-acre
Texas facility that disposes of radioactive waste.
“Harold Simmons was one of my best friends, and it’s never
easy to say goodbye to close friends,” Texas oilman T. Boone
Pickens Jr. said in a statement. “He was a passionate person --
passionate about his family, his business, philanthropy and
politics. We should all leave such a rich legacy behind.”
For Related News and Information:
Bloomberg Billionaires Index: RICH <GO>
Obituaries: NI OBIT <GO>
--Editors: Greg Ahlstrand, Paul Panckhurst
To contact the reporters on this story:
Brendan Coffey in Boston at +1-617-210-4635 or
bcoffey10@bloomberg.net;
Patrick Chu in Tokyo at +81-3-3201-8460 or
pachu@bloomberg.net
To contact the editor responsible for this story:
Patrick Chu at +81-3-3201-8460 or
pachu@bloomberg.net
2013-12-30 07:23:50.21 GMT
By Brendan Coffey and Patrick Chu
Dec. 30 (Bloomberg) -- Harold C. Simmons, the Texas
corporate raider nicknamed the “Ice Man” after structuring
leveraged takeover bids using junk bonds in the 1970s and ’80s,
has died. He was 82.
Texas Governor Rick Perry and state Attorney General Greg
Abbott confirmed his death in separate statements. Simmons was
hospitalized at Baylor University Medical Center in Dallas two
weeks ago and died on Dec. 28, according to the Dallas Morning
News, citing his wife, Annette. The cause of death wasn’t
disclosed.
Simmons supported Republican Mitt Romney in the 2012
presidential election and gave more than $15.7 million to
Republican super-political action committees in that contest
cycle, according to Bloomberg News. He was known for his
charitable giving as well, donating $177 million to the
University of Texas Southwestern Medical Center; in all more
than $400 million to medical and educational causes, mostly in
Texas.
“Harold Simmons lived the American dream,” Abbott said.
“His path began with the purchase of a small drug store, and
through hard work and the free enterprise system, he was able to
turn that investment into one of the greatest American success
stories of all time.”
Simmons was born during the depths of the Great Depression
to two schoolteachers in Wood County, Texas, in a home without
electricity or plumbing. After graduating Phi Beta Kappa from
the University of Texas, where he earned a master’s degree in
economics and played basketball, he worked as a bank auditor
before buying his first drugstore in Dallas in 1960 for $5,000
cash and a $95,000 loan.
Use of Leverage
Over the next 12 years, he turned it into a 100-store chain
scattered across Texas, with a boost from an $18 million
leveraged buyout of Ward’s Drug Store in 1969. He sold the chain
to Eckerd Corp. in 1973 for more than $50 million.
Subsequent deals, such as his investment in titanium
products maker Valhi Inc., typified his ability to recognize
underpriced assets and exploit his adeptness for numbers and
finance, skills that led him to the forefront of the leveraged
buyout craze of the 1980s.
Over the years, he owned a sugarbeet processor, a savings
and loan and fast-food restaurants. He made headline-generating,
if unsuccessful, bids to buy defense contractor Lockheed Corp.
and Pacific Southwest Airlines.
“They call me a takeover artist and make you think I come
and steal something,” he told D Magazine in a September 1982
profile. “Hell, I offer to buy that stock at a higher price
than anyone else will pay.”
Billionaire Ranks
Simmons’s net worth rose to $8 billion in 2013, according
to the Bloomberg Billionaires Index. He was the 158th richest
individual in the world when he died and the 56th wealthiest in
the U.S., according to the daily ranking.
He was the owner and chairman of Contran Corp., a closely
held company that controlled a number of industrial businesses,
including Kronos Worldwide Inc., the world’s largest mining
operation of ilmenite, the raw material used for titanium
products such as white pigment titanium oxide and titanium metal
products. Through NL Industries Inc., he produced security
products, ball bearings and ergonomic desk equipment. Valhi, his
biggest holding, owns Waste Control Specialists, a 1,338-acre
Texas facility that disposes of radioactive waste.
“Harold Simmons was one of my best friends, and it’s never
easy to say goodbye to close friends,” Texas oilman T. Boone
Pickens Jr. said in a statement. “He was a passionate person --
passionate about his family, his business, philanthropy and
politics. We should all leave such a rich legacy behind.”
For Related News and Information:
Bloomberg Billionaires Index: RICH <GO>
Obituaries: NI OBIT <GO>
--Editors: Greg Ahlstrand, Paul Panckhurst
To contact the reporters on this story:
Brendan Coffey in Boston at +1-617-210-4635 or
bcoffey10@bloomberg.net;
Patrick Chu in Tokyo at +81-3-3201-8460 or
pachu@bloomberg.net
To contact the editor responsible for this story:
Patrick Chu at +81-3-3201-8460 or
pachu@bloomberg.net