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Apr 20, 2014

Trade with Precision (TWP) - April 20, 2014: This week's market commentary videos and webinars.

from Trade With Precision - www.tradewithprecision.com

Watch this week's market commentary videos where Hao Sun provides a market outlook for the week ahead on the Russell 2000 and US Equity Markets along with the US Dollar Index.
Remember to register for this week's live webinars below:
The Five Pillars of Trading Strategy runs on
How To Become A Successful Trader runs on:

China allows gold imports via Beijing, sources say, amid reserves buying talk: GATA | THE GATA DISPATCH -April 20, 2014-.

China allows gold imports via Beijing, sources say, amid reserves buying talk

Submitted by cpowell on 06:06PM ET Sunday, April 20, 2014. Section: Daily Dispatches
By A. Ananthalakshmi
Reuters
Monday, April 21, 2014
SINGAPORE -- China has begun allowing gold imports through its capital Beijing, sources familiar with the matter said, in a move that would help keep purchases by the world's top bullion buyer discreet at a time when it might be boosting official reserves.
The opening of a third import point after Shenzhen and Shanghai could also threaten Hong Kong's pole position in China's gold trade, as the mainland can get more of the metal it wants directly rather than through a route that discloses how much it is buying.
China does not release any trade data on gold. The only way bullion markets can get a sense of Chinese purchases is from the monthly release of export data by Hong Kong, which last year supplied $53 billion worth of gold to the mainland.
One of the reasons why China could be encouraging more direct imports was because it wanted to avoid taking the Hong Kong-to-Shenzhen route that makes its gold purchases public, while China wants to keep the trade a secret, sources said.
"There is a view that why should people know how much China is buying," said one of the sources at a bullion banking operation in China. "With the Hong Kong route, there is a lot of transparency and people can easily monitor what is going in and out." ...
... For the full story:

Mike Kosares: Anti-gold scare tactics aren't very effective lately: GATA | THE GATA DISPATCH - APRI L20, 2014-.

Mike Kosares: Anti-gold scare tactics aren't very effective lately

Submitted by cpowell on 05:22PM ET Sunday, April 20, 2014. Section: Daily Dispatches
8:20p ET Sunday, April 20, 2014
Dear Friend of GATA and Gold:
The anti-gold propaganda of mainstream financial news organizations is getting tedious, Mike Kosares of Centennial Precious Metals in Denver writes today, the more so because a little research into the price predictions of gold's disparagers finds that they are usually wrong. Kosares' commentary is headlined "Press' Anti-Gold Scare Tactics Largely Ineffective" and it's posted at Centennial's Internet site, USAGold.com, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

TF Metals Report: The empty vaults of London: GATA | THE GATA DISPATCH -April 20, 2014-.

TF Metals Report: The empty vaults of London

Submitted by cpowell on 05:17PM ET Sunday, April 20, 2014. Section: Daily Dispatches
8:15p ET Sunday, April 20, 2014
Dear Friend of GATA and Gold:
JPMorganChase traded its short position in gold for a long corner not to profit by squeezing the market but to keep unloading metal to manage the price, the TF Metals Report's Turd Ferguson writes today. The exchange-traded fund GLD is still being drained to supply Asia with metal, Ferguson adds, but the supply seems tighter than ever. Ferguson's commentary is headlined "The Empty Vaults of London" and it's posted at the TF Metals Report's Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

YouTube | Al Jazeera English has uploaded News Bulletin - 20:00 GMT update.



Al Jazeera English has uploaded News Bulletin - 20:00 GMT update
News Bulletin - 20:00 GMT update
Al Jazeera English
The main headlines on Al Jazeera English, featuring the latest news and reports from around the world.

YouTube | VOAvideo has uploaded Ukraine Shootout Casts Doubt on Geneva Deal - April 20, 2014-.


VOAvideo has uploaded Ukraine Shootout Casts Doubt on Geneva Deal
Ukraine Shootout Casts Doubt on Geneva Deal
VOAvideo
A deadly shootout in eastern Ukraine has cast doubt on the viability of Thursday's Geneva accord between Russia, Ukraine, the United States and the European Union aimed at pacifying Ukraine's restive eastern territories. VOA's Michael Bowman reports, although much is unclear about Sunday's gun battle at a checkpoint manned by pro-Russian separatists, the incident shattered an Easter truce and appeared to dash already-scant hopes for a swift end to the unrest.

Zacks | Zim Weekly Update - April 20, 2014: The Biggest Problem Facing the Stock Market.

The Biggest Problem Facing the Stock Market 

by Mitch Zacks, Senior Portfolio Manager


There are many things that are bothering me right now about the market. For one, there is very strong statistical evidence that an increase in IPO activity leads to a drop in the performance of the market over the next five to seven years. Unfortunately, we are beginning to see a very definitive increase in IPO activity, and the activity disturbingly seems to be focused on nascent technology companies where valuations are way out of whack with current earnings. Speculative investors are buying stocks based on hockey-stick like earnings projections that are due to technological change. While the IPO activity has not yet reached the levels that we saw in previous bull markets, there is no way getting around the fact that increased IPO activity is a negative for the market.

Equity Valuations 

Another problem facing the market right now has to do with equity valuations. Currently, the S&P 500 is trading at roughly 17.4x trailing earnings. Since the 1950’s the valuation multiple of the S&P 500 has been on average 16.3x trailing earnings with a median level of 16.6X trailing earnings. Effectively, the market is more expensive now than it has been historically.

Some of the market’s valuation can be attributed to the fact that we are in an economic expansion, inflation remains relatively benign, the Federal Reserve is very accommodative, and interest rates remain near historic lows. Essentially, stocks remain cheap relative to bonds, but are a tad expensive relative to historical valuation multiples. Also, bull markets tend not to end at valuation multiples that are average. Nevertheless, the majority of the gains last year were due to expanding P/E multiples instead of growing earnings. This year I do not expect the P/E multiple to continue expanding, and in fact we are likely to see P/E multiple growth begin to stall out as interest rates rise.

Rising Interest rates 

This brings us to one of the biggest problems facing the market. Interest rates are going to be rising.

Yields on fixed income instruments are just too low. They are low because the Federal Reserve has been buying bonds, which causes bond prices to go up and causes yields to go down. Very simply, the Federal Reserve will have to stop buying bonds at some point, and interest rates will rise. We can get into all sorts of discussions as to whether it is the flow of bonds the Federal Reserve is buying or the amount of bonds they have already bought which causes interest rates to remain relatively low, but at the end of the day – the bond buying must come to an end and the Federal Reserve has to reduce their balance sheet, so the debate is to some extent moot.

(Continued below...)

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Download Zacks' April 2014 Market Outlook 

Mitch Zacks, Senior Portfolio Manager at Zacks Investment Management, oversees the management of billions of dollars for private clients. To learn how he is investing his private clients today click the link below.

Click Here to Download 
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Ultimately, interest rates are going to be rising, and my expectation is that when rates start to rise, as always happens after a low-rate environment, interest rates will rise faster than the market expects. Rising interest rates will put all financial instruments under pressure– I don’t care if it is a stock, an apartment building, a bond, or an oil and gas partnership– if interest rates rise, financial assets must fall in value. There is a caveat to this, of course, which is whether earnings also increase in a rising interest rate environment.

The economy in terms of its relation to the stock market is really divided into the following four possible scenarios:

Falling Interest RatesRising Interest Rates
Economic Expansion (Earnings Rise)Massive Outperformance-IDecent Performance-II
Economic Contraction (Earnings Fall)Decent performance-IIIHorrible Performance-IV


Stocks perform extremely well generating high double digit annual returns when we have a falling interest rate environment coupled with an economic expansion. Stocks do reasonably well – think in terms of high single digit annualized returns - in a rising interest rate environment with economic growth, or even in a recession where interest rates are falling. However, if interest rates rise and the economy contracts - stocks suffer large double digit losses.

So the key question in my mind is not whether rates are going to rise; I am very confident a few years from now the ten-year yield is going to be higher than it is now. The key question boils down to whether the economic expansion remains on-track.

I remember in 2008, sitting down with a prominent economist and indicating that I was very concerned about the inversion of the yield curve. Traditionally, when the yield curve inverts and the longer maturity investments have a lower -yield than the shorter term fixed-income investments, it is an indication that a deep recession is likely to occur. I remember very distinctly the economist responding that the shadow banking system makes the slope of the yield curve not as predictive as it once was. The point of the story is neither the economist nor myself could predict accurately the worst recession in sixty years was about to occur.

If you take as given that a recession is difficult to predict. You are left with a dilemma- you know most of the losses the stock market bears over time occur in quadrant IV, but you know it is hard, if not impossible, to predict when the economy will enter the fourth quadrant. The answer is, of course, that you take a step back and realize that, although the fourth quadrant is a possibility, it is not the natural state of the economy. Thus, when the economy plunges into a period of rising interest rates accompanied with contracting earnings you need to understand that the situation is temporary.

Putting it All Together 

What an investor has to learn is that trying to time the market is a losing proposition. Instead you have to make sure that your portfolio is diversified enough to handle those periods when the market comes under intense pressure. The answer is in the risk-control of the portfolio. That means sector and capitalization diversification at all times.

Personally, I feel that we are going to be in quadrant two for quite some time and we should look for the market to generate roughly 600 basis points above the risk free rate in the immediate future. Basically, the market’s future gains should be positive, but more muted relative to the strong returns of last year.

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The Best Asset Classes to Invest in Right Now 

Download the latest Zacks Investment Research market commentary and forecasts of future asset class returns. Learn where we believe the market is headed and why. This must-read report includes timely information regarding the stock market, the housing market, and the overall economy.

Click Here to Download Report 
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-Mitch Zacks



About Mitch Zacks 

Mitch is a Senior Portfolio Manager at Zacks Investment Management. He wrote a weekly column for the Chicago Sun-Times and has published two books on quantitative investment strategies. He has a B.A. in Economics from Yale University and an M.B.A. in Analytic Finance from the University of Chicago.


Mitch also is a Portfolio Manager for the Zacks Small Cap Core Fund ( ZSCCX ).

To contact us by mail:
Zacks Investment Management
Attn: Wealth Management Group
One South Wacker Drive, Suite 2700
Chicago, IL 60606


Disclosure 

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This communication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any securities or product, and does not constitute legal or tax advice. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Zacks Investment Management, Inc. is not engaged in rendering legal, tax, accounting or other professional services. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney- client relationship. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel.


    To contact us by mail:
    Zacks Investment Management
    Attn: Wealth Management Group
    One South Wacker Drive, Suite 2700
    Chicago, IL 60606
    Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.
    Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.
    This communication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any securities or product, and does not constitute legal or tax advice. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Zacks Investment Management, Inc. is not engaged in rendering legal, tax, accounting or other professional services. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney- client relationship. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel.