Guv shutdown? Obamacare? No Jobs? Doesn't stop NASCAR's S & P 500

[CountDeMoney]

Whew.  And I was worried the wealthy wouldn't be able to weather these storms.

Best Stock Market Since 1997 Seen With S&P 500 Momentum
By Lu Wang and Whitney Kisling - Nov 4, 2013
Bloomberg.com

The broadest equity rally on record will pick up speed through year end and lift the Standard & Poor's 500 Index to the biggest annual increase in 16 years, if history is any guide.

Shares have climbed in the final two months 82 percent of the time since 1928 when the benchmark gauge advanced at least 10 percent through October, data compiled by S&P and Bloomberg show. The mean November and December increase of 6 percent would boost the index to 1,862.79, an all-time high that is about 20 percent above the record 1,565.65 set in 2007.

Instead of selling shares to lock in profits during rallies, investors almost always add them in the final quarter, convinced that gains built up over the first 10 months will expand. The S&P 500's return has been positive over November and December every year since the bull market started in 2009. While earnings growth is slowing and the Federal Reserve is planning to curtail stimulus, Jeff Mortimer, director of investment strategy for BNY Mellon Wealth Management, says it usually doesn't pay to fight the trend in stocks.

"You have to pay attention to momentum in markets and that's what this calendar year is showing," Mortimer, whose firm has about $180 billion in client assets, said in a phone interview on Oct. 30. "Clients asked me, 'Why don't I take profit now?' My theory is you can sell a lot higher later."

Weekly Advance

U.S. stocks have risen for four straight weeks. The S&P 500 increased 0.1 percent to 1,761.64 last week as earnings at companies from Pfizer Inc. to General Motors Co. beat analyst estimates and the Fed said it needs more evidence of economic growth before reducing its stimulus program. Futures on the index gained 0.1 percent at 8:19 a.m. in London today.

The benchmark gauge for American equities gained 23 percent from January to October as companies such as Boston Scientific Corp. and Netflix Inc. advanced. A total of 447 stocks in the index are up this year, the most since at least 1990, and 80 percent traded above their 50-day moving averages last week, data compiled by Bloomberg show. That compares with 58 percent over the past 20 years.

The last time the S&P 500 recorded bigger returns for the first 10 months was in 1997, when stocks were in the middle of a bull market in which the index quadrupled over eight years. The gauge advanced 6.1 percent in November and December of that year, pushing the annual rally to 31 percent.

Missing Out

"People that are not in the market feel they're missing out and therefore want to join everybody else," Omar Aguilar, the San Francisco-based chief investment officer of equities at Charles Schwab Investment Management, said in an interview on Oct. 29. The firm had $229 billion in assets under management as of Sept. 30.

December has had the second-best returns of any month, with the S&P 500 climbing an average 1.5 percent since 1928, data compiled by Bloomberg show. For the final two months of the year, the index rose 68 percent of the time, more often than any two-month period except March to April. The mean 2.1 percent gain for the end of the year is almost double the 1.1 percent average for similar periods.

The S&P 500 is up more than 160 percent since 2009 after earnings expanded for four years and the Fed bought $2.3 trillion of bonds, keeping interest rates low to spur growth. Worse-than-estimated September payrolls and a government shutdown last month fueled speculation that the central bank will delay paring its monetary stimulus until March, according to a Bloomberg News survey of economists. Fed policy makers decided last week to maintain the $85 billion in monthly bond purchases.

Bubble Market

BlackRock Inc. Chief Executive Officer Laurence D. Fink, whose company is the world's largest money manager with $4.1 trillion in assets, said Fed policy is contributing to "bubble-like markets," such as the surge in stock prices.

"We've had a huge increase in the equity market," Fink said on Oct. 29 at a panel discussion in Chicago. "We have issues of an overzealous market again."

Equity valuations have increased 18 percent this year to 16.7, near the highest level in more than three years, even as U.S. gross domestic product is projected to expand 1.6 percent, almost half the rate of 2012, data and estimates compiled by Bloomberg show.

Economists this month cut their growth forecasts for the fourth quarter to 2 percent from an earlier projection of 2.5 percent. GDP hasn't expanded faster than 3 percent a year since 2005 and won't achieve that pace until 2015, they say.

Embedded Gains

"I just don't see the market having a reason as a whole to really go up a lot," David Pearl, co-chief investment officer at Epoch Investment Partners Inc. in New York, said in an Oct. 31 phone interview. His firm manages about $35 billion. "Generally if you're looking at a year where markets are up that much, it's usually a good economy. This year, it's not that great of an economy."

Even with this year's rally and increase in valuations, the S&P 500's price-earnings ratio is below the 15-year average of 19.3, data compiled by Bloomberg show. Profit growth will pick up this quarter, increasing to 6.8 percent or almost twice the 4.1 percent rate in the previous three months, according to more than 11,000 analyst estimates compiled by Bloomberg. It will rise more than 10 percent next year and in 2015.

"How can the market do so well? Because the market started the year inexpensive, the P/E ratios were too low," Abby Joseph Cohen, a senior investment strategist at Goldman Sachs Group Inc., said in an Oct. 31 Bloomberg Radio interview. "We still think the market is underpriced on a 12- to 18-month period."

Shares Double

Pfizer, the world's biggest drugmaker, is up 24 percent so far this year after earnings beat analyst estimates the last two quarters. The New York-based company had gained 71 percent in the first 10 months of 1997, before advancing another 5 percent by the end of the year.

Home Depot rallied 67 percent up to this point in 1997, going on to rise 5.6 percent more in November and December. The Atlanta-based home-improvement retailer has gained 24 percent in 2013, as earnings beat estimates every quarter this year. Per-share profits will rise 19 percent this fiscal year, which ends in January, according to analyst projections compiled by Bloomberg.

MGIC Investment Corp. extended a 59 percent rally another 10 percent by the end of 1997, data compiled by Bloomberg show. The home-loan guarantor based in Milwaukee reported Oct. 16 its second straight quarter of profits. The shares have risen 203 percent in 2013.

"Once you have an uptrend market throughout the year, there is enthusiasm for running up the return even further," Wayne Lin, a portfolio manager at Baltimore-based Legg Mason Inc., which oversees about $656 billion, said by phone on Oct. 31. "There is a momentum factor in markets, and right now the momentum factor is fairly strong."

[CountDeMoney]

Now see, this is how it's done on the S&P 500.  Need profits to cut future checks for negotiated settlements from currency probes?  Eliminate jobs.  The employees can pay to keep people out of jail.  Cheaper that way.

HSBC Profit Rises 30% on Cost Cuts as Currency Trades Probed
By Howard Mustoe - Nov 4, 2013
Bloomberg.com

HSBC Holdings Plc (HSBA), Europe's largest bank by value, said third-quarter pretax profit rose 30 percent as the lender cut costs and focused on its most lucrative markets.

Pretax profit climbed to $4.53 billion from $3.48 billion in the year-earlier period, the London-based lender said in a statement today. That missed the $5.54 billion median estimate of 10 analysts surveyed by Bloomberg.

HSBC also said it's being investigated by regulators, along with other firms, with regard to trading in the foreign-exchange market. Costs as a proportion of revenue, excluding gains and losses in the value of the bank's own debt, fell to 61 percent from 64 percent, approaching the goal of about 55 percent set by Chief Executive Officer Stuart Gulliver.

"In a subdued revenue environment, management continues to take out costs," Bernstein analysts including Chirantan Barua said in an e-mailed note after the results.

HSBC shares rose 16.6 pence, or 2.4 percent, to 703.90 pence at 11:41 a.m. in London. They have gained 8.8 percent this year, trailing the 18 percent advance for the 44-member Bloomberg Europe Banks and Financial Services Index.

Taking Charges

Gulliver said in May that he will cut an additional $3 billion of expenses after beating an earlier target. He has closed or sold 60 businesses and eliminated 46,000 jobs since the start of 2011. The bank has struggled to boost revenue crimped by the sovereign-debt crisis in Europe, the winding down of its U.S. consumer-finance operation and slower growth in China this year.

Pretax profit in Hong Kong rose 16 percent to $2.07 billion, boosted by a "stabilizing" economy in China, HSBC said today.

The lender booked a $428 million charge to repay customers wrongly sold loan insurance, hedging products and wealth advice, as well as a $575 million revaluation of the bank's debt. That contributed to the company missing analysts' estimates, and the earnings were positive otherwise, Ian Gordon, an analyst at Investec in London, wrote in a note to clients today.

Hong Kong was "a stand-out performer" in the quarter, Gordon wrote.

British lenders have been taking charges over the payment-protection insurance mis-selling and other scandals for the past year. HSBC set aside $147 million in the quarter for consumers sold loan insurance they either didn't want, need or understand, $132 million for businesses wrongly sold interest-rate hedging products and $149 million to investigate sales practices in its U.K. wealth business.

Currency Probe

HSBC hasn't suspended anyone over probes into foreign-exchange manipulation, Gulliver said on a conference call today. Foreign exchange accounts for the most revenue in the bank's global markets business, generating $660 million in the quarter.

U.K. and Swiss regulators are probing the $5.3 trillion-a-day foreign-exchange market after Bloomberg News reported in June that dealers in the industry said they had been front-running client orders and attempting to rig benchmark rates. Banks including Barclays (BARC) Plc and Citigroup Inc. have put staff on leave amid the probes.

"We are cooperating with the investigations, which are at an early stage," HSBC said today.

Investment Bank

Pretax profit at HSBC's investment-bank, led by Samir Assaf, fell to $1.85 billion from $2.25 billion, hurt by its corporate fixed-income business.

Weaker bond trading has hurt banks including Barclays, which said last week that that revenue from fixed income, currencies and commodities dropped 44 percent to 940 million pounds, the lowest since 2011. The five biggest U.S. investment banks' combined revenue from FICC trading slid 25 percent from a year ago, data compiled by Bloomberg Industries show.

Standard Chartered Plc (STAN), the other U.K. bank that gets most of its profit in Asia, last week posted lower revenue as growth slowed in its corporate banking business.

Gulliver said today that HSBC has consulted with shareholders on the European Union's bonus cap, which has prompted banks including Barclays to plan changes to their compensation structure.

The bank will decide how it will respond to the proposed rules in "the next few months," he said.

[Ed Anger]

I like making money.

[Admiral Yi]

Making money while you sleep is nice.

[The Brain]

Whore.

[derspiess]

I enjoy contributing to shareholder value.

[garbon]

Making money while you sleep is nice.

I hate that spend money while I sleep.

[Tamas]

Well the "investments" driving it is the make-believe money the Fed is "printing". Why on Earth should that be affected by, well, stuff? 

[The Minsky Moment]

Well the "investments" driving it is the make-believe money the Fed is "printing". Why on Earth should that be affected by, well, stuff? 

What does this mean?

[Admiral Yi]

It means that easy money is inflating asset prices.

[The Minsky Moment]

It means that easy money is inflating asset prices.

Then why not say that?

As to the proposition, the first step is to establish the premise.  In what sense is money "easy"?
Interest rates?  Short term rates and key benchmarks have been steady.  Long term rates are up.
Money supply aggregates?  M1/M2 growth has been slow in recent months.

The one relevant datum that has shown significant growth is the quantity of reserves kept at the Fed. 
One could call that easy money.  But the next question is how does the fact that member banks are stockpiling reserves at the Fed increase asset prices?

[Admiral Yi]

Then why not say that?

Dude, he's Hungarian and learned English on the fly. Let's see you do better on a Hungarian site.

[mongers]

Then why not say that?

Dude, he's Hungarian and learned English on the fly. Let's see you do better on a Hungarian site.

Yeah, quite a few of us forget this, due to how good their English is; probably puts them in the top decile of those learning it as a second language.

[The Minsky Moment]

Then why not say that?

Dude, he's Hungarian and learned English on the fly. Let's see you do better on a Hungarian site.

His English is quite good, good enough to know the difference between "easy" and "make believe"
But if Tamas wants to clarify, he is welcome to do so.

[Razgovory]

Then why not say that?

Dude, he's Hungarian and learned English on the fly. Let's see you do better on a Hungarian site.

His English is quite good, good enough to know the difference between "easy" and "make believe"
But if Tamas wants to clarify, he is welcome to do so.

That's not an assumption I would make with an Eastern European.