Today’s disappointing Ifo Business Climate Survey was lead by a general drop in the assessment of the Services Sector and, in particular, a sharp fall in the expectations component:The overall moderation does not, however, appear to bode poorly for the upcoming release of economic output in the third quarter:
In our quarterly call yesterday, ”Investing in a Post QE World” (here is a link to a video of the presentation), we highlighted the systems software industry as one where value is still compelling and many of the companies in that industry are very shareholder friendly. In particular, we highlighted Microsoft and CA Inc.
We received a question today regarding the usefulness of the Shiller P/E. For starters, it has a wonderful long-term history. There aren’t many series where we have 130 years of history.
With headlines like ’Plans for Political Union Unravel’ (WSJ) and ’Draghi’s Blunt Warning on Bank Stress Test’ (FT), policy (or, rather, lack of a coordinated one) appears poised to exert its influence on European equities once again:Combined with somewhat weaker economic and sentiment-related data releases, as well as overbought and extended technical patterns, can European
Everyone that’s read Burton Malkiel’s A Random Walk Down Wall Street learns the idea that the movement of stocks is random–they can rise or fall on any given day. Like a hitter in baseball or a shooter in basketball, players can go on ”runs” that temporarily give the appearance of non-randomness.
China’s flash manufacturing PMI came in at 50.9 in October vs the official reading of 50.2 in September. Readings above 50 signal expansion. The rise was mostly driven by the backlog of work and employment components (though the employment component remains below 50), but new export orders registered a small gain as well.
We perform a variety of calculations to understand the often imperceptible changes in the underlying structure of the stock market. One calculation we make is to measure the percent of stocks making a new 200-day high. Historically this metric gets the most extended during the first move off a major low–like in September 2009.
Xerox guided down 4Q EPS from continuing operations estimates to $0.28-$0.30 per share which was below the $0.33 analysts’ were expecting (they did manage to slightly beat expectations for the 3Q, however). Basically, the entire discrepancy is a charge of $0.04 for restructuring its outsourcing business.
The level of job openings has now been been basically unchanged since February. The job openings data may be signalling a stalling out of employment. Initial jobless claims fell by 12k but the prior week was revised up by 4k.
In the below charts we take the average YoY% change in consumer prices for 33 countries around the world. What we see is a trend of disinflation that started in mid-2011 and continued through September.