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Just coming back to you on this, it seems to me the ordainary people of Greece are sick of politicians and papers alike. If a few minor soundbites I experienced are anything to go by, they would scrap the whole system and start again.

 

Such a friendly folk, but I sat wondering as I have done on many previous visits, whether the heat and general laziness it causes, typifies the Greek attitude. Funny in a way, a nation that says no problem, is full of them.

 

 

Seen many perfect examples of this on a recent trip to the Carribeam. Its not just the heat that causes laziness, food is abundent and local distilled rum is dirt cheap - but does more damage that a can of special brew. One of the few places where you can see real life zombies walking around (seriously that what the locals call them) !!! I found it fascinating to see more than a few examples of rows of wooden shacks with a nice brick villa type building in the middle. Really made me think re winners and loosers.

 

I sometimes think it is wrong to assume that everyone is motivated by some capitalistic force to get on, work all hours in a day and make more and more. For most of us this way of life is forced upon us anyway, forever having to compete and these days it doesn't always get you a decent quality of life anyway, so I sometimes have admiration for those that don't want this rat race, stick two fingers up to it and prefer a more gentle approach. It is becoming more difficult to be a winner in this system unless you play by the same rules as those that run it. A viable alternative is to not play the game at all although ultimately you will have money worries as inflation will get to you.

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It would seem that in the US they are still playing cat and mouse over raising the debt ceiling. I was expecting the markets to fire a warning shot across the bow of Washington today, a little sell off on the Dow perhaps, a little reminder from the bond market, but so far it has been a bit of a damp squib. Still the potential for a real correction if there is no real agreement, but if the politicians kiss and make up there is the potential for serious upside as the market plays catch up with earnings season. Get the debt concerns on the back burner and these markets could fly again.

 

Default Swaps

 

The cost of insuring U.S. debt rose, sending credit-default swaps on Treasuries up three basis points to 56.15, approaching the highest in 17 months, according to CMA.

 

Two-year Treasury yields increased two basis points to 0.42 percent and 10-year yields added four points to 3.01 percent.

 

“You’d think in the longer run that if there’s something truly catastrophic kind of on the horizon, or truly a market changing event, that we’d see a bigger move than we’ve seen,” Guy Lebas, the chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said in a Bloomberg Television interview. “The U.S. bond markets, and Treasuries in particular, have proven remarkably resilient in the face of all these risk factors, most of them coming out of Washington.”

 

Debt Debate

 

The government can avoid a default for at least a month after the Aug. 2 deadline to lift the debt ceiling set by the Treasury Department, said John Silvia, chief economist at Wells Fargo Securities LLC. The Federal Reserve and the Treasury can work together to generate enough cash for two or three months to avoid default, Silvia, who is based in Charlotte, North Carolina, said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu.

 

House Speaker John Boehner’s two-step debt-limit plan would raise the U.S. borrowing limit by up to $1 trillion and later by about $1.6 trillion while requiring larger spending cuts, according to Republican aides. The plan would require $1.2 trillion in spending cuts in the first phase and up to $1.8 trillion in the second step, the aides said. Congress would be required to vote by the end of this year on a constitutional amendment for a balanced budget, one aide said.

 

http://www.bloomberg.com/news/2011-07-24/u-s-stock-futures-dollar-decline-as-gold-gains-as-u-s-debt-talks-stall.html

 

Apple, Coke Defy Economy to Lead Earnings Surprise

 

U.S. second-quarter corporate earnings are outstripping estimates as companies from Apple Inc. to Coca-Cola Co. boost sales with new products and benefit from a weaker dollar, surprising analysts who predicted a bigger drag from the economy.

 

Earnings per share jumped 19 percent from a year earlier for the 122 companies in the Standard & Poor’s 500 Index that reported second-quarter results as of July 22, according to data compiled by Bloomberg. That beat the 13 percent average growth estimate that analysts held at the start of the month, and about 82 percent of the companies reporting have exceeded forecasts.

 

The earnings outlook had been tamped down by analysts because of the earthquake that cut supply lines in Japan, a looming debt crisis in Europe, unrest in the Middle East and weaker U.S. economic indicators, said Jonathan Golub, UBS AG’s chief U.S. market strategist in New York.

 

“It reflects how pessimistic everyone is after the ‘08 crisis,” said Jim Paulsen, chief investment strategist at Wells Capital Management in Minneapolis. “Wall Street estimates just can’t catch up to Main Street reality because we can’t believe it’s actually that good.”

 

http://www.bloomberg.com/news/2011-07-25/apple-coke-defy-economy-to-lead-earnings.html

 

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I sometimes think it is wrong to assume that everyone is motivated by some capitalistic force to get on, work all hours in a day and make more and more. For most of us this way of life is forced upon us anyway, forever having to compete and these days it doesn't always get you a decent quality of life anyway, so I sometimes have admiration for those that don't want this rat race, stick two fingers up to it and prefer a more gentle approach. It is becoming more difficult to be a winner in this system unless you play by the same rules as those that run it. A viable alternative is to not play the game at all although ultimately you will have money worries as inflation will get to you.

 

You're probably right in many respects. Round the small Carribean islands many choose not to participate, but just have enough to get by. Remember seeing a washing line of t-shirts strung between a couple of palms, underneath 4 locals sat playing cards and drinking LDB's special "local" brew, saw the same a few days later when I passed again. This was a little island round the Tobago Cays(you had to use boat to get there - which they did). Story being, sell a odd shirt, play cards, have a brew, rinse-repeat. What a life eh! Who is right/wrong?

 

My observation on the Greeks was more i'm surprised they manage to riot, given the lack of action(energy?) on a daily basis. Though they didn't seem to like the politicians for sure.

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My observation on the Greeks was more i'm surprised they manage to riot, given the lack of action(energy?) on a daily basis. Though they didn't seem to like the politicians for sure.

 

Hot blooded!? The Italians and French have the same reputation. They like their down time but when they get riled. Anyway, most people in Greece were probably in the dark as to what was going on until it hit them. The same could be said of the UK today, most people really don't have a clue as to what is really going on, that is why the press here can get away with saying it is an Euro/EU/European problem, nothing to do with us guv'. If the markets turn against the UK a lot of people may suddenly find they agree with the Greeks that were on the streets.

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I sometimes think it is wrong to assume that everyone is motivated by some capitalistic force to get on, work all hours in a day and make more and more. For most of us this way of life is forced upon us anyway, forever having to compete and these days it doesn't always get you a decent quality of life anyway, so I sometimes have admiration for those that don't want this rat race, stick two fingers up to it and prefer a more gentle approach. It is becoming more difficult to be a winner in this system unless you play by the same rules as those that run it. A viable alternative is to not play the game at all although ultimately you will have money worries as inflation will get to you.

 

Hmm yes and no. I have great admiration for those who have exited the rat race by being successful, that involves taking a risk at some stage down the line - small business people, private investors similar to those in Free Capital etc. Actually have a bit of resect for those who appear on Dragons Den/The Apprentice (well with the odd exception). Maybe thats why I dont get angry with the Buy to Let brigade unlike many here. Is rarer to find successful people in Carribean (at least in the circles I move in) but many that are doing OK and content.

 

Find it harder to respect the approach of those who are not playing the game at all, not talking about your arty types but those sitting back and collecting benefits in the UK, or sitting under the tree waiting for the fruit to fall in the Carrib. There is a fair amount of petty theft in the Carrib, so generally the fruit doesnt get a chance to drop! But... if you have enough of your own land of course, your sorted.

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You're probably right in many respects. Round the small Carribean islands many choose not to participate, but just have enough to get by. Remember seeing a washing line of t-shirts strung between a couple of palms, underneath 4 locals sat playing cards and drinking LDB's special "local" brew, saw the same a few days later when I passed again. This was a little island round the Tobago Cays(you had to use boat to get there - which they did). Story being, sell a odd shirt, play cards, have a brew, rinse-repeat. What a life eh! Who is right/wrong?

 

Yes sounds like the life. I guess I just saw a few too many examples of people who couldnt even be bothered to that !

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Hmm yes and no. I have great admiration for those who have exited the rat race by being successful, that involves taking a risk at some stage down the line - small business people, private investors similar to those in Free Capital etc. Actually have a bit of resect for those who appear on Dragons Den/The Apprentice (well with the odd exception). Maybe thats why I dont get angry with the Buy to Let brigade unlike many here. Is rarer to find successful people in Carribean (at least in the circles I move in) but many that are doing OK and content.

 

Find it harder to respect the approach of those who are not playing the game at all, not talking about your arty types but those sitting back and collecting benefits in the UK, or sitting under the tree waiting for the fruit to fall in the Carrib. There is a fair amount of petty theft in the Carrib, so generally the fruit doesnt get a chance to drop! But... if you have enough of your own land of course, your sorted.

 

Although some may find it hard to believe I don't think everyone wants to play the game of capitalism, but most, if only because of the inflationary money economy that we live in are likely to be forced ultimately to play. I tend not to dwell upon those that may be sitting back and collecting benefits because it is very difficult to prove numbers and so easy to attack, which is why the British press make a living out of it. One thing I do know is that they could be idle all their lives as a group and they will never sponge as much money out of the UK taxpayer that the bankers did post 2007. Remember also that the "dole" tends to go straight back into the economy, it is spent. Bankers don't do that with their taxpayer handouts.

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Apple, Coke Defy Economy to Lead Earnings Surprise

 

U.S. second-quarter corporate earnings are outstripping estimates as companies from Apple Inc. to Coca-Cola Co. boost sales with new products and benefit from a weaker dollar, surprising analysts who predicted a bigger drag from the economy.

 

Earnings per share jumped 19 percent from a year earlier for the 122 companies in the Standard & Poor’s 500 Index that reported second-quarter results as of July 22, according to data compiled by Bloomberg. That beat the 13 percent average growth estimate that analysts held at the start of the month, and about 82 percent of the companies reporting have exceeded forecasts.

 

The earnings outlook had been tamped down by analysts because of the earthquake that cut supply lines in Japan, a looming debt crisis in Europe, unrest in the Middle East and weaker U.S. economic indicators, said Jonathan Golub, UBS AG’s chief U.S. market strategist in New York.

 

“It reflects how pessimistic everyone is after the ‘08 crisis,” said Jim Paulsen, chief investment strategist at Wells Capital Management in Minneapolis. “Wall Street estimates just can’t catch up to Main Street reality because we can’t believe it’s actually that good.”

 

I read this as time to take a contrarian approach to the current market sentiment. Time to be bullish. The perception of the debt issue needs be put on one side again, the market needs to believe that something is being done about it, but that quote looks like a contrarian bullish sign to me. Earnings are good, companies are making money, the microeconomic picture actually looks good in many sectors. The market will have to play catch up if they can put their macroeconomic fears to one side and price in recovery. Sooner or later they usually do.

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Debt deadline getting closer. If it doesn't get done and the markets fall as is likely, it must be time for bargain hunting.

 

Advisers Tell Investors Not To Sell as Debt Deadline Nears

 

As nerve-racking as he finds the debt-ceiling negotiations, Chris Rainbolt, 36, hasn’t shifted his portfolio in anticipation of a possible U.S. government default.

 

“It’s kind of like you’re standing on a cliff, and as long as you don’t fall off the cliff you’re fine,” said Rainbolt, who lives in Dallas and works in real estate. “If you do fall off the cliff, it doesn’t matter what you do.”

 

Rainbolt is among investors whose financial advisers are telling them not to sell their stocks or bonds as time runs out for Congress to pass a deal to raise the U.S. debt ceiling. Treasury Secretary Timothy F. Geithner has said the U.S. will exhaust options for paying all of its bills on Aug. 2.

 

“There’s really just not a whole lot that you can do,” said Paul Jacobs, who’s a financial planner based in Atlanta for Palisades Hudson Financial Group, which manages more than $1 billion and whose clients have an average of about $20 million in assets. “You can’t just put it all in a money-market fund, because then if there is a nightmare scenario there’s really nowhere to hide.”

 

=========================

 

Investor Withdrawals

 

Investors withdrew about $6.8 billion from stock funds in the week ending July 20, the most in five weeks, according to the Washington-based Investment Company Institute, a fund- industry trade group. Money-market funds held by retail investors increased $3.5 billion that week as funds held by institutions decreased $28 billion. Money-market funds hold about $684 billion in U.S. sovereign debt and must generally hold highly rated short-term securities, according to ICI.

 

“We’re sticking to our mantra of hanging in there and not getting caught up in the noise of what’s going on,” said Jay Higgins, a client relationship manager at Minneapolis-based Riverbridge Partners, which has about $3 billion in assets under management.

 

One client wanted to move all of his investments into cash until a deal on the debt ceiling is in place, and Higgins persuaded the client not to, he said.

 

Buying Opportunity

 

The threat of a U.S. downgrade heightens the need for municipal-bond investors to diversify among states, said Richard Saperstein, managing director of Treasury Partners, a division of Chicago-based HighTower Advisors.

 

A lowering of the U.S. credit rating could lead to a downgrade of other securities such as municipal issuers and government agencies, Saperstein said.

 

“Downgrade or default might be a short-term buying opportunity because the markets are spooked by what’s coming,” Research Affiliates’ Arnott said.

 

Investors should consider increasing their allocations to commodities, inflation-linked bonds and emerging-markets stocks and bonds, Arnott said.

 

Debra Taylor said she’s increased clients’ allocations this year to precious metals and to certain currencies, including the Canadian dollar and the Swiss franc. Taylor, an adviser in Franklin Lakes, New Jersey, has not made any major moves in anticipation of the Aug. 2 deadline, except when clients have made specific requests.

 

http://www.bloomberg.com/news/2011-07-28/default-a-black-turkey-as-advisers-tell-investors-not-to-sell.html

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So, they are going to take it right to the end and if there is no agreement on the debt ceiling by August 2nd? How about 600 off the Dow? Then 400 the next day? May take something like this to wake up Washington.

 

In the meantime, stocks are cheap by historical standards, past experience suggests that any sell off would be a buying opportunity.

 

London's flagship index is trading on less than ten times earnings.

 

Remember the market turmoil of 2008 and 2009? When the FTSE slid by 48%, and naked fear stalked the streets?

 

I thought so. But I've news for you. Shares today are cheaper than they were back then.

 

That's right: Britain's blue chips are cheaper than they were this time last year, cheaper than they were this time in 2009, and cheaper than they were this time in 2008.

 

And while that July-to-July comparison doesn't quite capture the market low of 3 March 2009, when the FTSE 100 closed at 3,512, it still flags up a mouth-watering buying opportunity.

 

What's going on?

 

Clearly, despite the falls of the last week or so, we're a long way away from 2009's low of 3512, when the market's P/E stood at just 7. Even so, a P/E of under 10 is 40% cheaper than last year, and isn't to be sniffed at. So why are shares so cheap?

 

The answer lies on the earnings side of the ratio. As Cliff D'Arcy wrote a few days ago, according to the latest Capita Registrars Dividend Monitor Report, dividends are running at a three-year high, up by 27% in the second quarter of 2010.

 

What's more, as Todd Wenning, lead analyst on the Fool's Dividend Edge investing service notes, "Those companies increasing dividends now outnumber those cutting dividends by a 6.5‑to‑1 margin ‑‑ a record high since Capita Registrars has been keeping score."

 

And Fool poster McEssex, a fund manager in real life, has noted that forecast dividends over the next twelve months are the highest that they have been for four years.

 

"The opportunity cost has never been lower," he writes. "Interest rates are 0.5% now, and were about 5% four years ago. On this data, the market has a prospective yield of 4%."

 

http://www.fool.co.uk/news/investing/2011/07/28/britains-blue-chips-go-on-sale.aspx?source=ufwflwlnk0000001

 

Another contrarian indicator.

 

Savers desert stock market amid fears of another global recession

 

Savers are abandoning the stock market at a rate not seen since the financial crisis of 2008 amid fears that another global recession is looming, The Daily Telegraph has found.

 

High inflation, the US debt crisis and ongoing problems in eurozone countries such as Greece, Portugal and Ireland have left ordinary investors feeling that they have “nowhere to hide”, experts said.

 

The amount of money placed in investment funds by savers has fallen by up to 90 per cent in recent months, figures show, as investor confidence hits lows not seen since the depths of the recession three years ago.

 

Instead, savers are rushing to put their money in perceived “safe havens”, with sales of gold funds rising by nearly 60 per cent last week.

 

Increasingly, people are opting to invest simply in cash, even though rising inflation means that they are effectively losing money.

 

The growing uncertainty in the safety of the stock market came as the FTSE 100 index dropped by one per cent - wiping £15billion off the value of Britain’s most successful companies after poor economic data from the United States. The index has fallen two per cent in the past week.

 

http://www.telegraph.co.uk/finance/personalfinance/investing/8672005/Savers-desert-stock-market-amid-fears-of-another-global-recession.html

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So, they are going to take it right to the end and if there is no agreement on the debt ceiling by August 2nd? How about 600 off the Dow? Then 400 the next day? May take something like this to wake up Washington.

In the meantime, stocks are cheap by historical standards, past experience suggests that any sell off would be a buying opportunity.

Another contrarian indicator.

On friday I updated a list of 20 or so shares I follow (either own or interested in buying) with the recent quarterly reports. Media groups vary in how they calculate P/Es so I do it myself going to the direct reports on companies websites so that at least the values i calculate are consistent. As a general observation both the earnings have increased and the price decreased since the previous quarter. The ratios look attractive but being already >100% invested the only way to buy more is to increased the leverage.

 

The debt uncertainty is a bit of a wild card which could go either way. If the final resolution is a plan to come to term with the long term debt that is surely good and could set up the stockmarket for the next leg up. However as you indicate it could easily have some nasty short term drops which if leveraged is a real problem due to margin calls, knock out levels etc.

 

So what to do given the my current situation ? Basically I decided to keep it simple and if the S&P hits 1200 increase the leverage (sell stocks or index ETFs and buy the same items with x2 leverage). This could be repeated at 1100 and 1000 at which point everything would be leveraged.

 

Unless the US politicians pull something out of the bag Mon and Tue will be interesting.

 

One other bit of interesting news this week is that Swedish GDP rose 5.3 % year on year in the last quarter with exports up 7.8% driven by sales of large engineering companies (ABB, Sandvik, Atlas Copco etc).

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On friday I updated a list of 20 or so shares I follow (either own or interested in buying) with the recent quarterly reports. Media groups vary in how they calculate P/Es so I do it myself going to the direct reports on companies websites so that at least the values i calculate are consistent. As a general observation both the earnings have increased and the price decreased since the previous quarter. The ratios look attractive but being already >100% invested the only way to buy more is to increased the leverage.

 

The debt uncertainty is a bit of a wild card which could go either way. If the final resolution is a plan to come to term with the long term debt that is surely good and could set up the stockmarket for the next leg up. However as you indicate it could easily have some nasty short term drops which if leveraged is a real problem due to margin calls, knock out levels etc.

 

So what to do given the my current situation ? Basically I decided to keep it simple and if the S&P hits 1200 increase the leverage (sell stocks or index ETFs and buy the same items with x2 leverage). This could be repeated at 1100 and 1000 at which point everything would be leveraged.

 

Unless the US politicians pull something out of the bag Mon and Tue will be interesting.

 

I'm wondering if in the end it is Obama who will give way and then put the blame for any negative reaction re where the cuts hit firmly on the shoulders of the Republicans and the Tea Party?

 

If the politicians don't get an agreement a stock market sell off is most likely if only to remind Washington that taking on the markets is a risky strategy. Not sure if the Tea Party understand this yet, being the most ideological in Congress. Trouble is, the markets want to see both an extension of the debt limit and a coherent plan to solve the debt issue over the long term. I doubt they will get that by August 2nd even if there is a deal.

 

 

One other bit of interesting news this week is that Swedish GDP rose 5.3 % year on year in the last quarter with exports up 7.8% driven by sales of large engineering companies (ABB, Sandvik, Atlas Copco etc).

 

Not just Sweden. Germany is doing ok as well.

 

Chart of the Day: a strong Germany should man up on euro pain

 

The German Federal Statistical Office yesterday revealed that the country’s unemployment rate fell to a record low of 7% this month, with the creation of 11,000 jobs.

 

This brings to around 550,000 the total number of new jobs created in the German economy since June 2009. This puts Germany way ahead of its peers in the eurozone.

 

Anthony Doyle of M&G says the first phase of the German economic boom revolved around its exporters, helped by a weak euro as concerns grew about the indebtedness of ‘peripheral’ countries such as Greece, Ireland, Portugal. This year, however, the growth (a stunning 4.9%) is more broadly based as businesses and consumers express their confidence about the future.

 

This would not have been the case without the euro, says Doyle. ‘It is our view that without the euro currency in place, the German deutschmark would be the strongest currency in the world, German bunds may have negative yields, and the German economy would probably be in recession.’

 

http://citywire.co.uk/money/chart-of-the-day-a-strong-germany-should-man-up-on-euro-pain/a512202

 

Although, in keeping with the market preference for doom and gloom at the moment.

 

Weak Earnings in Germany Raise Concerns of Slowing Growth

 

Underwhelming earnings reports Thursday from several of Germany’s largest companies, along with a report showing a slump in confidence among European business and consumers, raised concerns that growth could be slowing even in the Continent’s strongest economies.

 

http://www.nytimes.com/2011/07/29/business/global/reports-heighten-concerns-about-german-economy.html

 

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Not sure that it is wise right now for Washington to upset China.

 

China, which has the most to lose because it holds the largest amount of Treasuries — at least $1.16 trillion — offered a blistering attack on Washington on Friday, calling for a show of responsibility and an end to the partisan bickering.

 

“The ugliest part of the saga is that the well-being of many other countries is also in the impact zone when the donkey and the elephant fight,” the state-run news agency, Xinhua — considered the propaganda arm of the Communist Party — said in an opinion piece Friday, referring to the standoff between Democrats and Republicans.

 

Xinhua said the “irresponsible” brinksmanship in Washington risked “strangling the still fragile economic recovery of not only the United States but also the world as a whole.”

 

Officials in Europe were more diplomatic, but archly recalled that American leaders had admonished them just a few weeks ago to straighten out the messy politics of the Continent’s own debt crisis.

 

“One could now ask why is the U.S. debt treated any better than a country like Portugal, which has about the same levels of deficit and debt,” said a senior European policymaker, who spoke on condition of anonymity.

 

The main concern in Europe is that a Washington failure to lift the debt limit will cause the dollar to weaken further, pushing up the euro and making it harder for Europeans to work out their problems.

 

http://www.nytimes.com/2011/07/30/business/global/global-concern-over-us-debt-ceiling-disagreement.html

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Tea Partiers don't like public spending accept it would seem when it is going to defense contractors and it is big money.

 

Sixty House members backed by the Tea Party, whose opposition to federal spending helped bring on an impasse over raising the U.S. debt ceiling, represent districts that last year received $43 billion in government contracts.

 

In 16 of those constituencies, spending exceeded $1 billion each -- more than twice the median amount for all House districts, Bloomberg Government reported today.

 

“People don’t like federal spending in the aggregate, but when it’s back home where you’re spending the money, that’s a different story,” said Charles J. Finocchiaro, a political scientist at the University of South Carolina, in Columbia, in an interview. The state is home to two House Tea Party Caucus members and Republican Governor Nikki Haley, elected last November with the movement’s support.

 

============================

 

$3 Billion Districts

 

“I’m supportive of our defense contractors and our Department of Defense,” Barletta said yesterday in an interview. “I have many defense contractors in my district. However, we can’t spend money we don’t have.”

 

The Colorado districts of Republicans Mike Coffman and Doug Lamborn received about $3 billion each in fiscal 2010, the most among those held by Tea Party Caucus members. Both voted for the Boehner plan.

 

Defense contractors Lockheed Martin, Northrop Grumman and ITT Corp. (ITT) have operations in those districts, Coffman’s 6th and Lamborn’s 5th, where the North American Aerospace Defense Command, the U.S. Air Force Academy and Fort Carson Army Base are located.

 

Fort Carson, Colorado’s second-largest employer, has an annual economic impact of $2.1 billion, including contract awards, construction projects, utilities and local purchases, according to a fact sheet for the base, where 24,410 military personnel are stationed.

 

Tea Party Republican Rob Bishop’s Utah district, the 1st, generated $2.8 billion in federal contracting business in 2010. The biggest recipients were Alliant Techsystems Inc. (ATK), Northrop Grumman and L-3 Communications Holdings Inc. (LLL)

 

http://www.bloomberg.com/news/2011-07-29/tea-party-lawmakers-against-debt-deal-gain-from-big-spending-in-districts.html

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So, they are going to take it right to the end and if there is no agreement on the debt ceiling by August 2nd? How about 600 off the Dow? Then 400 the next day? May take something like this to wake up Washington.

 

In the meantime, stocks are cheap by historical standards, past experience suggests that any sell off would be a buying opportunity.

 

 

 

Another contrarian indicator.

 

I'm thinking the markets have priced in all the gloom and uncertainty, but the fact it looks a(expected) temporary fix, their will not be a huge rally. Neither will P.M's change much, all looks very kicking the can down the road to me.

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I read this as time to take a contrarian approach to the current market sentiment. Time to be bullish. The perception of the debt issue needs be put on one side again, the market needs to believe that something is being done about it, but that quote looks like a contrarian bullish sign to me. Earnings are good, companies are making money, the microeconomic picture actually looks good in many sectors. The market will have to play catch up if they can put their macroeconomic fears to one side and price in recovery. Sooner or later they usually do.

"Everyone" seemed to be expecting a Rally when the deal was announced.

So when it happened, you get a brief rally, and a selloff

 

I note that the DAX is one of the weakest markets, and the Euro is weak too, so there may be some bad news lurking around for Europe, which could come out in the next day or two

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"Everyone" seemed to be expecting a Rally when the deal was announced.

So when it happened, you get a brief rally, and a selloff

 

I note that the DAX is one of the weakest markets, and the Euro is weak too, so there may be some bad news lurking around for Europe, which could come out in the next day or two

 

Don't think there has been a real rally yet and the market is well oversold. The sell off happened because of worse than expected manufacturing numbers. I think we are having a goldilocks recession, neither too hot or cold, but a bit lumpy. I like it when there is all this gloom, it suggests the market will do the opposite, the only question is when.

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What are your views on the FTSE no.6?

I've mentioned previously that 5500/5600 is a key area of support and still think that is the case. If we go lower than that the bears may well finally be getting their next sustained move down, but by how much? However, I still think the FTSE is likely to follow the US, so unless there is a bad 3rd qt to come, or the markets get really spooked by a US downgrade regardless of the vote tonight, I still expect the markets to go higher by the end of the year. The traditional good months Sep-Dec are just around the corner as well. My only concern is that some of the longer term charts, weekly and monthly are suggesting weakness as are the moving averages, so we are entering an important period as to whether the markets go higher or not.

 

It is still probably more of a trader's market, in which case regardless of whether it is going up or down providing you are good on the short as well as the long side it doesn't really matter what the direction is as long as you are trading with it.

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Chinese and Indian tourists are helping the UK's recovery.

 

UK stores boosted by Chinese shoppers

 

Chinese tourists have been on a spending spree in British shops, helping to boost the profits of department stores and luxury goods retailers, fresh figures have shown.

 

Spend by Chinese tourists in the UK jumped by 82pc in the year to the end of March 2011, with the average Chinese shopper spending £605 per trip, according to Global Blue, a company that allows shoppers to claim back VAT from stores.

 

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Last week the Office for National Statistics said that visits from overseas holidaymakers hit a record 29.8m in 2010, of which visits from China were up 13pc and India up 98pc.

 

However, the tourists' shopping has only boosted some retailers, most notably department stores and those selling upmarket fashion.

 

Burberry, Mulberry, LVMH and Swatch all said, over the last month, Chinese shoppers had helped them achieve very strong profits.

 

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8675915/UK-stores-boosted-by-Chinese-shoppers.html

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I note that the DAX is one of the weakest markets, and the Euro is weak too, so there may be some bad news lurking around for Europe, which could come out in the next day or two

Tada! - it was Italy, and you can see it in credit spreads for Italian banks

 

italian_banks.jpg

 

/see http://www.zerohedge.com/news/summarizing-collapse-italian-banking-sector-one-chart

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Now way oversold.

 

ScreenShot145.gif

 

U.S. stocks fell, extending the longest slump since 1978 for the Dow Jones Industrial Average, and Treasuries rose as concern the economy is slowing overshadowed the cheapest equity valuations in a year. Oil tumbled, while the franc slid as Switzerland cut interest rates.

 

The Dow slid for a ninth straight day, losing 141.23 points to a four-month low of 11,725.39 at 10:43 a.m. in New York. The S&P 500 declined 1.4 percent after yesterday’s plunge erased the gauge’s 2011 gain and left it trading at 13.8 times reported earnings. The Stoxx Europe 600 Index sank 2.4 percent. Oil retreated 2 percent following a government report showing an increase in stockpiles. The franc weakened against 13 of its 16 major peers. Treasuries reversed declines, sending the 10-year yield down six basis points to 2.56 percent.

 

More than $2 trillion was erased from the value of global equities in the past week amid concern the economic recovery is faltering. Service industries expanded in July at the slowest pace since February 2010 as orders and employment cooled, data from the Institute for Supply Management showed, a sign the biggest part of the U.S. economy had little momentum entering the second half.

 

“Valuation is compelling, corporate earnings are compelling, but the economic environment is challenging” said David Sowerby, a Bloomfield Hills, Michigan-based money manager at Loomis Sayles & Co., which oversees $155 billion.

 

http://www.bloomberg.com/news/2011-08-03/asian-stocks-oil-slump-on-concern-u-s-recovery-faltering-euro-weakens.html

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So, unless you are in the end of the world camp, here's a contrarian view. Bad US jobs number tomorrow and the cheap good companies will be even cheaper.

 

Buy this market

 

August 4, 2011, 1:07 PM

 

By James Altucher

 

You can’t argue with the market. It’s pointless. But I’m hearing people say, “Now is the time for capital preservation. Go into bonds.” etc.

 

This seems silly to me. The time when I wish everyone was in bonds (including me) was 10% ago on the S&P.

 

Now is the time to buy. When there is blood in the streets. I follow about 30 stocks on my screen. They are all red. Statistically, when 10 stocks are down for every one up, the market tends to be higher one week later. Here’s more facts to ponder:

 

- The debt ceiling crisis has passed.

 

- 75% of companies beat earnings estimates.

 

- Household debt obligations (rent, credit card bills, car payments, etc., divided by income) are at lows since 1992.

 

- Manufacturing and service sectors are still expanding.

 

- GDP growth is still expanding.

 

- Many commodity prices at at historic lows.

 

- Car sales are up 5.8% YoY.

 

- The effects of QE2 + Japanese stimulus are not yet baked into the economy.

 

- Market indices are market-cap weighted, so are we really going to sit on our hands when AAPL has $79 billion in cash and trades at 12x forward earnings? INTC at 10x forward earnings? MSFT at 10x forward earnings? Meanwhile AAPL has 92% YoY growth.

 

And yet, some headlines were: “U.S. could default.”

 

It’s IMPOSSIBLE for the nation to default. Even without the debt ceiling, we were allowed to roll over debt. Every newspaper and TV station was lying when they said we might stop making Social Security payments. Its lies and fear that the media continually spreads. I honestly don’t understand why I get fact-checked on every little number while the headlines continue to lie to the masses.

 

Meanwhile, the market trades for 12x forward earnings. And companies will continue to beat them.

 

http://blogs.marketwatch.com/thisisinsane/2011/08/04/buy-this-market/

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At times like these when markets are in freefall people need to make their own decisions as to whether things look cheap or not and decisions on the right time to buy or totally avoid. If you are of the doom and gloom type then you will be avoiding like the plague and expecting more of the same, but historically it is always the case that times like these give people the greatest opportunities, markets always come back, even if it is the start of a new bear downleg at some stage it will bounce because markets always do. They do not fall in a straight line and just keep going, and right now the market is in irrational mode, loads of companies reporting great numbers and falling 10-15%, you have to know that doesn't make sense.

 

5500 breached on the FTSE, but much of it may well have been automated selling as technical numbers were breached. Same in the US. Bad job numbers in the US today and we could hit 5000-5100 on the FTSE and 11000 on the Dow. Good or not so bad numbers and markets could end the day 2-3% higher. Go figure.

 

So, who is a real contrarian when moments like this happen? Everyone selling and wanting to get out of equities, could there not be a better buy signal? However, the responsible approach is to not try and catch the falling knife, but wait for evidence of a turn, that is the risk you have to take at times like this - most won't. If this is a new bear leg down the low may not happen for some time, but in the meantime there will be rallies, it will be interesting to see how strong they are.

 

Mobius Says Stocks Look Better, Faber Sees S&P 500 Rally

 

Templeton Asset Management’s Mark Mobius said emerging economies are in “better shape” than developed nations amid turmoil roiling global markets. Marc Faber, publisher of the Gloom, Boom & Doom report, expects the U.S. Standard & Poor’s 500 Index to rally about 40-to-50 points.

 

==================================

 

“We’re looking at equities all the time and equities are looking better and better with all this turmoil,” Mobius, executive chairman of Templeton Asset Management’s emerging markets group, said in an interview on Bloomberg Television today. “The emerging markets are in much better shape than the developed countries. If you look at the gross domestic product levels, foreign exchange reserves, emerging markets are in a very, very sweet spot.”

 

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Markets are “extremely oversold,” Faber, 65, said in a separate Bloomberg Television interview. He expects a “snap- back” rally in the S&P 500 though doesn’t expect new highs for equities in 2011.

 

http://www.bloomberg.com/news/2011-08-05/mobius-says-stocks-looking-better-as-marc-faber-predicts-s-p-500-rally.html

 

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