Friday, October 10, 2014

Markets sell off on worries about slower global growth

Dow dropped 115 closing at the lows, decliners over advancers 3-1 & NAZ plunged 102.  Bargain hunting cut losses for the MLP index.  At the close, if fell "only" 7+ (still very big) to the 487s & the REIT index was pennies in the 298s (money coming from selling in MLPs).  Junk bond funds slid lower & Treasuries rose.  Oil was flattish at depressed levels & gold fell from a 2-week high as signs of an improving US economy boosted the dollar, cutting the metal’s appeal as an alternative investment.

AMJ (Alerian MLP Index tracking fund)

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CLX14.NYM....Crude Oil Nov 14....85.84 Up ...0.07 (01%)

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German Finance Minister Wolfgang Schaeuble
Photo:   Bloomberg

ECB pre Mario Draghin & German Finance Minister Wolfgang Schaeuble differed over what further steps to take if the euro-area economy keeps weakening as the region came under renewed foreign pressure to revive growth.  As the IMF’s annual meeting, Draghi pledged anew to loosen monetary policy more if needed & called on those govs with the room to ease fiscal policy to do so.  By contrast, Schaeuble warned against US-style quantitative easing & urged continued budgetary discipline.  The differences demonstrate the lack of a common front in euro-area policy making as its economy continues to deteriorate & the IMF estimates there is as much as a 40% risk of a 3rd recession since 2008.  Finance ministers & central bankers from the G-20 meet today & Europe's economic performance will be among the issues discussed.  Adding to the sense of division, Bundesbank pres Jens Weidmann said targeting the amount of assets owned by the ECB is a risky endeavor.  Draghi has suggested the balance sheet could be boosted by as much as €1T ($1.26T) although he backpedaled on that this month.  “It worries me quite a bit, there’s a risk related to the announcement of a balance-sheet target, together with the two purchase programs,” Weidmann said.  The danger is “that we’ll buy these assets overpriced” & that would transfer risk from banks to the central bank, he said.  This division is serious, as they question the idea of throwing more money at a difficult problem.

Draghi Clashes With Schaeuble Over Steps for Europe

Iran will sell its oil to Asia in Nov at the biggest discount in almost 6 years, matching cuts by Saudi Arabia as global crude benchmarks slide deeper into a bear market.  State-run National Iranian Oil cut official selling prices to buyers in Asia for Nov, according to leakers.  The decrease came a week after Saudi Arabia, the world’s largest oil exporter, reduced the price of Arab Light crude for Asia to the lowest since Dec 2008.  Brent crude, the intl benchmark, fell to the lowest in almost 4 years today.  Middle Eastern oil producers are facing greater competition in Asia, their largest market. Cargoes from the US, Russia & Latin America are finding buyers there amid a surplus on intl markets.  The pace of demand growth is lower in the region as the economy slows in China, the world’s 2nd-largest oil consumer.  Futures for Brent & WTI have fallen more than 20% from their Jun peaks.  State-owned Saudi Arabian Oil Oct 1 cut prices for all grades & to all regions for Nov.  The Asian price of Arab Light was cut by $1 a barrel to a discount of $1.05 to the average of Oman & Dubai crudes.  Saudi Arabia cut its oil prices to boost margins for Asian refiners who couldn’t process the crude profitably, not to start a price war, according to a leaker.  OPEC members in West Africa are also experiencing lower demand for their crude oil, bringing greater price competition.

Iran Matches Saudi Oil Discounts as Brent Slides Deeper Into Bear Market

P&G New York Subway Crest Ad
Photo:   Bloomberg

Procter & Gamble, a Dow stock & Dividend Aristocrat, is promoting deodorant, toothpaste & air freshener in its first ad campaign focused on urban consumers.  The marketing push, called New York Tough, is aimed specifically at residents of the biggest US city, who can see the advertising on subway trains & hear it on local radio.  The ads, which began appearing in May, will be followed next week by an online series featuring new “Saturday Night Live” cast member Michael Che.  He’ll interview New Yorkers on the challenges of living in the city.  Sample observation: “If you’ve ever been on an uptown bus on a day like today when it’s hot and humid, you know what smell is.”  The campaign is a departure for PG, the maker of Bounty paper towels & Tide detergent, whose ads frequently feature suburban moms.  With the industry suffering from sluggish growth, consumer-products companies are under increasing pressure to broaden their appeal. Singles also make up more than 1/2 the adult population now, according to the Bureau of Labor Statistics.  That means traditional moms aren’t making as many buying decisions.  P&G is counting on slogans such as “Garlicky pizza breath is tough. Crest is tougher” to keep its products top-of-mind when New Yorkers have their special moments -- like armpits in the face on the crosstown local.  Much of the campaign is aimed squarely at the group many consider the quintessential New Yorker: the young, single apartment dweller.  As part of the push, PG sponsored a comedy night hosted by Marlon Wayans.  There’s also a Twitter component.  The campaign encompasses Secret, Bounty, Crest, Tide & Febreze along with Head & Shoulders brands without an end date.  The stock jumped 1.03 in a tough market.  If you would like to learn more about PG, click on this link:

P&G Takes Its First-Ever Urban Campaign to the Streets, Subway

Procter & Gamble (PG)

This has been one of the roughest weeks for the stock market in years.  Up & down with huge swings.  The VIX, volatility index, was under a very mild 12 in late Aug.  Today it's over 20.  Nervousness & fear are on the rise & money is flowing into Treasuries, but not gold (the traditional safe haven investment).  In less than a month the yield on the 10 year Treasury dropped from over 2.6% to 2.3%, nor seen since Jun 2013.  At the root of the sell-off is the drop in Brent & WTI oil prices.  Selling comes from fears that global economic growth is slowing, something I have been writing about for weeks.  Political chaos, starting with Ukraine & the Iran-Syria mess, makes matters worse.  Tech stocks have been punished badly & MLPs, a low beta industry, have also suffered as low oil prices question expanding the use of fracking (high cost) technology.  Dow is down a massive 500 in Oct & NAZ sank 215 (5%).  This ugly month can get much worse.

Dow Jones Industrials

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