(more…)

“Never test the depth of the river with both feet”. — Warren Buffet

1. Precious metals in vicious sell-off — Gold continued a sell-off that began last week and has turned into a full-scale stampede. A number of reasons have been given for gold’s free-fall, chief among them the ECB’s pressurization of Cyprus’ central bank to sell its gold reserves to help pay for the country’s bailout.
2. China first quarter GDP falls short — Reuters, the world’s second-biggest economy grew 7.7 percent in the first quarter from a year ago, slower than 7.9 percent hit in Q4 2012. Industrial production data for March also disappointed, coming in at +8.9% vs consensus of +10%, although retail sales beat forecasts with an increase of 12.6%.
3. Moody’s lowers China outlook — Moody’s cut its outlook on China’s government bonds to stable from positive citing risks tied to local government borrowing. The action by the agency follows a similar measure by Fitch Ratings last week.
4. European car sales continue to plunge — European car registrations dropped for the 18th consecutive month in March, slumping 10% to 1.35M vehicles. Germany led the way as sales skidded 17%, while Spain, Italy and France all fell, although the U.K. rose 5.9%. GM’s (GM) registrations dropped 13%, Ford’s (F) 16% and Toyota’s (TM) 17%, although Honda’s (HMC) rose 17%.
5. AAII Bullish Sentiment Update — courtesy from BIG, the sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment rose from 19.3% up to 26.9%. Even at this week’s level though, there have only been 12 weeks out of 215 in the current bull market where bullish sentiment was lower.

The week ahead — Economic data from Econoday.com:

“Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria.” — Sir John Templeton

1. Disability claims spike following recession — the number of people receiving disability benefits has jumped from 7.1M in December 2007 to an estimated 8.9M in March, or 5.4% of the civilian workforce. That compares with just 1.7% in 1970. The latest trend costs 0.6% of national output, or equivalent to around $95B a year.
2. Chinese imports suggest solid demand — China swung to a shocking trade deficit of $884M in March from a surplus of $15.25B in February, badly missing forecasts for a surplus of $14.7B. Imports rose 14% and beat consensus, helping to reduce worries over the strength of domestic demand, while exports climbed 10%. However, questions have been raised about the data, especially with exports to Hong Kong rising by what researcher IHS says is an “astounding” 92.9%.
3. Facebook to roll out new targeted ad tool — per WSJ, in an attempt to win more advertising dollars, Facebook Inc. (FB) is using new ways to cull personal information from outside the social network and match it with data submitted by its billion-plus users. Facebook launched a new last week that will help advertisers directly target its members based on their non-Facebook activity, including their Web surfing, email subscriptions and spending. The tool combines the social network’s data with that from third-party marketers such as Acxiom (ACXM) and Alliance Data Systems (ADS).
4. Japan Return from 1994 to Present —

5. Obama signs order for $109 billion in 2014 sequester cuts — President Barack Obama signs order for the next $109 billion of the reductions to military and domestic programs for the year starting on October 1, 2013.
6. Retail sales post biggest drop in 9 months — Marketwatch, spending falls by 0.4% in March as most stores take a hit. Sales for January were also revised to show a 0.1% drop instead of a 0.2% increase, suggesting that first-quarter growth might not be as strong as forecast.
7. Cost of Cyprus bailout ‘rises to 23bn euros’ — The cost of the bailout for Cyprus has increased to 23bn euros ($30bn; £19.5bn), according to a draft document prepared by the country’s creditors. Cyprus will have to find 13bn euros to secure 10bn euros from the European Union and the IMF.

The week ahead — Economic data from Econoday.com:

“All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.” —Arthur Schopenhauer

1. China unveils new property curbs — China trying to cool the again-bubbly property market, Beijing banned single-person households in the city from buying more than one residence and increased the minimum down-payment required for all buyers of 2nd homes.
2. Factories Cool Off As Possible Spring Slowdown Looms — ISM’s manufacturing gauge fell 2.9% to 51.3 in March, signaling a slower pace than expected. It shows a possible sign of another economic slowdown this spring according to IBD.
3. Stockton cleared for bankruptcy protection — in a blow to municipal bondholders, a judge has ruled that Stockton in California is eligible for bankruptcy protection. The decision allows the city to keep its pensions intact while imposing losses on those holding its paper. Jefferson County in Alabama and San Bernardino in California – along with other municipalities – are watching closely.
4. Court tells holdouts to respond to Argentina’s bond offer — A U.S. appeals court ordered holdout creditors to respond to Argentina’s proposal to offer them restructured bonds that either discount the original debt’s face value or extend the final payout years into the future. Argentina had been trying to avoid returning the full amount, sparking fears it could default, as it did in 2001.
5. Japan unveils massive stimulus plan (EWJ) — the Bank of Japan (BOJ) said it would increase its purchase of government bonds by 50 trillion yen ($520bn; £350bn) per year in its most aggressive steps to date to battle deflation and a stagnant economy. The BOJ will buy $79 bil in bonds a month, that is the equivalent of almost 10% of Japan’s annual gross domestic product.
6. Russell 2000 Vs. S&P 500 Divergence — is it a warning sign of things to come for small caps and the broader market? Below is the chart of the two indexes courtesy of BIG.

7. Hong Kong hit by bird flu fears — Hong Kong stocks suffered their worst drop in more than eight months last week as worries about the impact from a new strain of avian flu in China hurt sentiment, airline shares were hit the most. Below is the chart of the HangSeng during the last bird flu crisis.

The week ahead — Economic data from Econoday.com:

“If something anticipated arrives too late it finds us numb, wrung out from waiting, and we feel – nothing at all. The best things arrive on time.” – Dorothy Gilman

1. Senate backs online sales tax measure — the Senate has voted 75-24 to allow states to collect sales taxes from online retailers with $1M+ in annual revenues and no presence within a given state’s borders. While the vote was non-binding, the margin of victory suggests a filibuster shouldn’t be a problem when a binding vote is held. Amazon (AMZN) and eBay (EBAY) have already begun collecting in a number of large states, and many investors assume that collections will expand in time.
2. S&P500 Comparison between 2012 versus 2013 — courtesy of BIG, below is a chart showing the performance of the S&P 500 in 2013 overlaid on a chart of its performance in 2012 through the end of July. As shown, while the S&P 500 was up slightly more in the first quarter of 2012, the index has tracked its 2012 pattern pretty closely in the first quarter of this year.

3. Cyprus works to avert run on banks — Cyprus prepared capital controls to prevent a run on the banks after being closed for almost two weeks. Russia has warned Cyprus not to make the controls too onerous. Uninsured depositors at Laiki bank, which is being shut down, will probably lose 80% of their cash, the rest of which could take years to return, while those at Bank of Cyprus could take a haircut of up to 40%.
4. JPMorgan Chase Faces Full-Court Press of Federal Investigations — from DealBook, Federal prosecutors are reportedly investigating whether JPMorgan (JPM) breached the law by not fully alerting authorities about suspicions related to Bernard Madoff. The probe adds to several others JPMorgan is facing. At least eight federal agencies are investigating the bank, including the Federal Deposit Insurance Corporation, the Commodity Futures Trading Commission and the Securities and Exchange Commission. Federal prosecutors and the F.B.I. in New York are also examining potential wrongdoing at JPMorgan.
5. Government funded until September — President Barack Obama yesterday signed the FY 2013 funding bill into law, one day before the previous financing measure was due to expire. The package includes the $85B of sequestration and ensures that the government will be financed until the end of the fiscal year in September, with spending projected at $984B.

The week ahead — Economic data from Econoday.com: