Week June 17 2011 – Weekly Recap & The Week Ahead
Monday, June 20th, 2011“The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell.” – Benjamin Graham.
1. China’s consumer inflation hits 5.5% — Chinese consumer inflation accelerated to a three-year high in May, in line with expectations and bolstering the case for tighter credit conditions to help contain prices.
2. BOJ keeps rate at zero, expands lending facility — the Bank of Japan has kept its key rate at 0%-0.1% and slightly raised its outlook. “Japan’s economy continues to face downward pressure, mainly on the production side due to the effects of the earthquake disaster, but is showing some signs of picking up,”
3. Banks get another month to fix foreclosure practices — regulators have given leading mortgage servicers a further 30 days to submit plans for revamping their business practices, in particular loan modifications and foreclosures. The banks, which include Bank of America (BAC), Wells Fargo (WFC), JPMorgan (JPM) and Citigroup (C), also need to identify and compensate borrowers who may have suffered financial harm due to improper repossessions.
4. Fed mulls adopting inflation goal — Fed officials are in talks about setting an explicit inflation target, beyond the theoretical debates the FOMC has held on the issue for over a decade, sources said. Ben Bernanke has long supported such a strategy, and it is practiced by central banks around the world, including in the U.K. and Canada.
5. India hikes interest rates by quarter point — the Reserve Bank of India on Thursday hiked interest rates for the tenth time in 15 months, lifting its key repo rate by a quarter point to 7.50% as it noted inflation pressures persisted even amid recent signs of cooling in the economy.
6. SEC may charge ratings agencies — the SEC may bring civil fraud charges against credit-rating companies for their role in the financial crisis, sources said. The regulator is investigating S&P (MHP) and Moody’s (MCO), and is focusing on whether the agencies committed fraud by not doing the research necessary to adequately rate the subprime mortgages and other loans that underpinned mortgage-bond deals.
7. Biggest banks set for higher capital requirements — the world’s largest banks are facing an extra capital requirement of 2.5% of their assets that would be on top of the ‘Basel III’ minimum of 7% set by regulators last year. Sources said the banks include Citigroup (C), JPMorgan (JPM), Bank of America (BAC), HSBC (HBC) and Barclays (BCS).
8. Latest sentiment figures from the American Association of Individual Investors (AAII), Bullish Sentiment shows a modest uptick; However, less than a third of investors are currently in the bullish camp (29%), which is less than half the levels we saw towards the end of 2010. Chart courtesy from the Bespoke Investment Group.
9. Market short-Term oversold — chart below displays the VIX (fear indicator). VIX measures of the implied volatility of S&P 500 index options.
The week ahead — Economic data from Econoday.com: