Replies to post #5687 on The Rising Influence of Rising Affluence

[DewDiligence]

CLF +9%. As a rule of thumb, jbog’s bearish posts on the natural-resources sector such as the one in #msg-79275473 are a pretty good signal that the sector is at or near a bottom.

[DewDiligence]

Stocks Close at Multiyear High

[The story in #msg-79323462 was a major driver for today’s move, IMO.]

http://online.wsj.com/article/SB10000872396390444273704577637024081962272.html

›September 7, 2012, 5:32 p.m. ET
By MATT JARZEMSKY

Stocks edged up, adding to multiyear highs, as disappointing August jobs growth stoked speculation the Federal Reserve will unveil further measures to juice the U.S. economy.

The Dow Jones Industrial Average added 14.64 points, or 0.1%, to 13306.64, its highest finish since December 2007. The Standard & Poor's 500-stock index gained 5.80 points, or 0.4%, to 1437.92, its highest close since January 2008. [Including reinvested dividends, the S&P 500 is way ahead of its Jan 2008 level, of course.] Materials shares led the advance on Friday [e.g. CLF was +14% and VALE +7%], with coal miner Alpha Natural Resources jumping 99 cents, or 17%, to $6.90, after China approved infrastructure spending to support its economy [#msg-79323462]. The Nasdaq Composite Index ticked up 0.61 point, or less than 0.1%, to 3136.42, building on a rally that has seen it surpass a high hit nearly 12 years ago.

For the week, the Dow rose 1.6%, the most since late July, and the S&P 500 had its steepest increase, 2.2%, since early June, thanks to a rally Thursday after European Central Bank President Mario Draghi detailed a bond-buying program aimed at cutting the borrowing rates of the euro zone's most debt-strapped countries.

"The path of least resistance is higher, not lower," said Mark Lehmann, president at JMP Securities. "Despite all the bad news and all the fear and all the problems and blowups, the market is making new highs. That's telling you that people are underexposed to equities, that you do have underparticipation, but there is a recovery going on."

The U.S. economy added 96,000 jobs in August, the Labor Department reported, short of economists' expectation for 125,000 jobs. The unemployment rate, obtained in a separate survey, fell to 8.1% from 8.3% a month earlier, bucking economists' predictions for it to remain unchanged.

"It's not bad enough to have immediate QE3, but it's not good enough to take additional stimulus off the table," said Dean Junkans, chief investment officer of Wells Fargo Private Bank, referring to "quantitative easing," or asset purchases by the Federal Reserve meant to support the economy.

Mr. Junkans said the drop in unemployment offered little comfort because it reflected the fact that Americans are leaving the labor pool. The labor force participation rate fell to 63.5% in August from 63.7% a month earlier, the department reported, the lowest since 1981.

Small-capitalization stocks outperformed Friday, with the Russell 2000 index adding 0.5%. Sectors seen as tied to global growth, such as energy and financials, also outpaced the broader market.

"With a weaker-than-expected payroll number, investors are really positioning themselves for QE," said Steven DeSanctis, small-cap strategist at Bank of America Merrill Lynch "They're looking for outperformance by the riskier assets."

European markets were broadly higher, with the Stoxx Europe 600 up 0.2%. The index reached a 14-month high in intraday trading before pulling back.

Asian markets surged, with China's Shanghai Composite running up 3.7% after Beijing's approval of infrastructure projects. Japan's Nikkei Stock Average climbed 2.2%.

Crude-oil prices rose 0.9%, to settle at $96.42 a barrel, while gold prices added 2%, to finish at $1,737.50 a troy ounce. The dollar fell against the euro and yen. The yield on the 10-year Treasury note fell to 1.662%.

In corporate news, Kraft Foods fell 2.32, or 5.5%, to 39.99, weighing on the Dow, after giving outlooks for the two companies into which it plans to split its business. [I think KFT’s split-up is dumb, FWIW.]

Etc.‹

[DewDiligence]

I’m not normally into conspiracy theories…however, the article in the People’s Daily (the official newspaper of China’s Communist Party) implying that a new round of stimulus spending in China would not happen until 2013, which was published two days before the announcement of a large stimulus plan, makes me wonder if people in high places made money from this misdirection. It would have been pretty easy to clean up by shorting a stock such as CLF before the People’s Daily article and then covering and going long before the stimulus announcement.

[DewDiligence]

Chinese Economy Picks Up Pace

http://online.wsj.com/article/SB10001424127887323894704578108141057439464.html

›November 9, 2012, 10:26 a.m. ET
By BOB DAVIS

BEIJING—China's economy is starting to accelerate after nearly two years of slowing growth, giving a lift to global economic prospects, although sustained growth may require a big change in Beijing's economic policies.

Industrial and consumer indicators released on Friday suggested that China's economy strengthened in October, albeit modestly, the second month in a row to show positive results. Industrial production grew 9.6% in October from a year earlier, an increase from the 9.2% gain in September.

"We're getting a U-shaped recovery, which is what we need" in China says Standard Chartered China analyst Stephen Green. "Once they stabilize the economy, they need to turn to big issues of reform" to sustain growth.

Compared with China's average annual growth of 10% over the past 30 years, the pickup is likely to be slight. In a speech on Thursday, Hu Jintao, China's president and the outgoing Communist Party chief, set a goal of doubling China's 2010 GDP by 2020, suggesting that China's planners foresee roughly 7% growth a year for this decade. [I.e. 1.07^10 is very close to 2.0.]

Still, the direction of the Chinese economy now appears upward, a break with the past seven quarters during which the pace of China's growth steadily declined. China grew at 7.4% in the third quarter of 2012 year over year, and a number of analysts expect an increase in the current quarter, closer to 8%.

Fixed-asset investment in nonrural areas, a closely watched indicator of construction activity and demand for machinery and equipment, picked up slightly. It was up 20.7% from a year earlier in the January-October period, rising from a 20.5% increase in the January-September period.

Retail sales rose 14.5% year over year compared with 14.2% in September.

The positive data offered further signs that a rebound in the Chinese economy that began in September continued in October, after several months of slowing growth.

While that may ease worries that China's economy would slow further and perhaps crash land, other problems remain in the global economy, including Europe's continuing debt crisis and the so-called fiscal cliff in the U.S. The latter is the fear that the U.S. will impose huge tax increases and spending cuts if President Barack Obama and Congress can't reach a deal on how to reduce the national debt over time.

Charlene Chu, an analyst at Fitch Ratings, said that faster credit growth in China was behind the rise in economic activity. Bank lending and bond issuance picked up sharply in the third quarter, she said, making it easier to fund infrastructure projects that had been approved by Beijing but which had languished for lack of money. Spending on railway projects, in particular, has picked up.

According to data issued Friday by the China Trustee Association, an industry body, new funding provided by China's trusts—a type of wealth management company that taps private funds—for infrastructure projects was 310.86 billion yuan ($49.76 billion) in the third quarter, almost triple the 116.24 billion yuan they provided a year earlier.

Should Chinese policy makers decide that more stimulus is in order, Friday's data indicated they have room to do so. Consumer prices rose by 1.7% in October, a 33-month low. Inflation is widely expected to rise somewhat over the coming months, but remain below 4%.‹

[DewDiligence]

NYT feature on China’s expanding network of bullet trains:

http://www.nytimes.com/2013/09/24/business/global/high-speed-train-system-is-huge-success-for-china.html

Just five years after China’s high-speed rail system opened, it is carrying nearly twice as many passengers each month as the country’s domestic airline industry. With traffic growing 28 percent a year for the last several years, China’s high-speed rail network will handle more passengers by early next year than the 54 million people a month who board domestic flights in the United States.

Li Xiaohung, a shoe factory worker, rides the 430-mile route from Guangzhou home to Changsha once a month to visit her daughter. Ms. Li used to see her daughter just once a year because the trip took a full day. Now she comes back in 2 hours 19 minutes.

Business executives like Zhen Qinan, a founder of the stock market in coastal Shenzhen, ride bullet trains to meetings all over China to avoid airport delays. The trains hurtle along at 186 miles an hour and are smooth, well-lighted, comfortable and almost invariably punctual…

… China relocated large numbers of families whose homes lay in the path of the tracks and quickly built new residential and commercial districts around high-speed train stations. The new districts, typically located in inner suburbs, not downtown areas, have rapidly attracted large numbers of residents, partly because of China’s rapid urbanization. Enough farm families become city dwellers each year to fill New York City…

New subway lines, rail lines and urban districts are part of China’s heavy dependence on investment-led growth. Despite repeated calls by Chinese leaders for a shift to more consumer-led growth, it shows little sign of changing. China’s new prime minister, Li Keqiang, publicly endorsed further expansion of the 5,900-mile high-speed rail network this summer. He said the country would invest $100 billion a year in its train system for years to come…

All that rail will require a lot of steel and iron ore.