Market Insights

Tech: A Sector to Avoid...At Least Today

The rumors continue to swirl about the possibility of a speculative tech bubble, with what is seen as a crowded market for internet IPOs. But bubble or no bubble, the tech sector isn’t looking good these days.

As of the close on Friday, tech is negative for the year. The Nasdaq Composite Index is down -.34% year-to-date, while the Dow is up 4.42%, and the S&P 500 is up 1.93%.

And tech sector is lagging behind other sectors, down -.2% year-to-date (only financials have seen a greater decline so far this year).

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A Guarantee That is Not Risk-Free

A reassuring name does not make an investment risk-free. That is why FINRA and the SEC have issued a new warning about structured notes with principal protection.

The market for these products has grown in recent years, and that’s not really a good thing. Terms like “principal protection”, “absolute return” and “capital guarantee” are meant to give investors a sense of security. But, as the investor alert cautions, these products are absolutely not risk-free.

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Now the Double Dip in Housing is Official

A few weeks ago, I wrote that home prices had double-dipped. And last week, that was officially confirmed.

The S&P Case-Schiller home price index fell 3.6% in March, the eighth consecutive monthly decline. And the report “is marked by the confirmation of a double dip in home prices across much of the nation”.

The news was already bad a few weeks ago, when Clear Capital reported that “prices have double-dipped…below prior lows experienced in 2009”.

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More Bad News For Financials

 

More bad news for financials: Moody’s Investors Services placed Bank of America (down 15% year-to-date), Citigroup (down 15.75% year-to-date) and Wells Fargo (down 13% year-to-date) under review last week. Banks ratings were boosted following government bailouts, and now the agency will review whether “these ratings should be adjusted to remove this unusual uplift and include only
pre-crisis levels of government support”.

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Is The Ecomony Slowing Down

The question: is economic growth contracting? Answer: it certainly isn’t picking up any steam.

Last week the Commerce Department released the second revision of first quarter GDP (which was unchanged), showing that the economy grew 1.8% (a slower pace than expected).

But there’s more to the growth story that is disconcerting lately. Factory activity is showing signs of weakness.

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Chile: Time to Take Notice

The magnitude 8.8 earthquake that struck Chile in February of 2010 was the sixth largest quake on record since 1900, and it caused an estimated $30 billion in damage (the country has a $164 billion economy). But that didn’t stop the Chilean market from gaining 28% over the past year.

And while GDP contracted 2% following the disaster, it didn’t stop the Chilean economy from growing 5.2% last year, the fastest pace in 5 years.

And now Chile is expanding at an even faster speed: GDP rose 9.8% in the first quarter this year – the fastest pace in 15 years.

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A Green Light on Emerging Market Bonds

It’s been a rocky month for the markets, with the S&P 500 declining for the past three consecutive weeks. But emerging markets have bucked the trend: as of last week, the J.P. Morgan Emerging Market Index Global is up 1.2% for the month.

Is the tide shifting for emerging market debt? Typically, when investors lose confidence in the markets, emerging markets are among the first to suffer. But the debt of emerging economies has held up amid the recent volatility.

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Hewlett-Packard: A Good Value, or a Value Trap?

The third quarter is “going to be another tough quarter”, according to Hewlett-Packard CEO Leo Apothaker. The company has “absolutely no room for profitless revenue or any discretionary spending”. Managers are urged to “watch every penny”.

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Cisco: Growth is “Off the Table”

Cisco’s previous long-term annual revenue growth target of 12-17% is now “off the table”, according to CEO John Chambers. 

And growth won’t be back on the table anytime soon.  According to last week’s earnings report, while sales gained 4.8%, profits dropped 18%.  What’s more: the company announced it expects this quarter’s revenue growth to be up 2% at best…if not flat. 

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Why I Still Like China Over The Long Term

 

Source: www.cia.gov

Mark your calendars for 2016.  That’s when, according to the International Monetary Fund, China will overtake the U.S.  

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