The Latest Russian And Ukraine Troop Movement : On The Edge Of War

If Putin needed a pretext to finally drive across the Ukraine border, he got it today following first the death of nearly 40 pro-Russian protesters in Odessa during a confrontation between pro-Russia and pro-Kiev forces, and then, what appears to be a storming in progress right now by the Ukraine national guard of yet another separatist-controlled city in east Ukraine: Kramatorsk.

According to RT, Ukraine’s National Guard is storming the eastern town of Kramatorsk even as it has also resumed its special operation in Slavyansk, where two soldiers have been killed.

“The assault is starting now,” a Kramatorsk self-defense activist has told RIA Novosti by phone. Another activist told the news agency that the National Guard opened fire on self-defense forces.

Dozens have been killed or injured in Kramatorsk, a doctor told RIA Novosti. The medic added that the fighting has now stopped and all of those injured have been taken to hospitals in Kramatorsk and Slavyansk. At least two died on the way to the hospital, she said.

Meanwhile, the Ukrainian military’s special operation has resumed in the nearby town of Slavyansk. The headquarters of the people’s self-defense is under snipers’ fire, according to Itar-Tass. There are reports of injuries among protesters.

Recall that Putin has made it very clear that all the Kremlin needs to green light an operation in Ukraine is a pretext of "self-defense" for the pro-Russian citizens currently there being attacked by the local military, something which if the tables were turned, would have been classified as a civil war by the impartial western media.

So what does the theater of operations look like should Russia finally get involved?

The Washington Post is publishing a new map that shows, using information from the Royal United Services Institute, recent troop movements in the region. The graphic illustrates how military exercises conducted by Russia have left a big build-up of troops on Ukraine's border. It also shows Ukraine's own military moves to its borders with Russia and Moldova's Russian-dominated enclave, Transnistria.

It may be a long weekend.

Sell In May & Go Away PART 2

There is an old Wall Street axiom that goes "Sell in May and go away, come again after St. Leger's day."  Of course, as with all Wall Street axioms, they are viewed by the media to be "valid" only if they work every single year. The reality is that no axiom, investment discipline or strategy works all the time. It is the cumulative effect over long periods of time which defines success or failure.

 In order to provide some context to today's selected readings, both for and against this particular "Wall Street wisdom," I am providing some statistical analysis.  The table below, which uses Dr. Robert Shiller'sdata, shows the monthly statistical data of returns which I will use for the remainder of this missive.

Historically, May is the 3rd worst performing month for stocks on yielding an average return of 0.27% and a median return of 0.49%.  The chart below graphically depicts the disparity of monthly average and median returns.

May, as shown in the above, also represents the beginning of the "seasonally weak" period for stocks.  As the markets roll into the early summer months, May and June tend to be some of weakest months of the year along with September.  This is where the old adage of "Sell In May" is derived from.  Of course, while not every summer period has been a dud, history does show that being invested during summer months is a"hit or miss" bet at best as shown in the next chart of historical returns for May back to 1900.   While May's monthly average is skewed by sharp deviations in returns during the "Great Depression," more recent years have been primarily contained, with only a couple of exceptions, within a +/- 5% return band as shown below.

One last point, as I discussed in "Sell In May Particularly During Mid-Term Election Years:"

While there are some years that have posted sizable gains during the summer months, such years do not invalidate the long term statistical probabilities. As the table shows above, the average annual return from the summer months is significantly poorer than the fall and winter. To show the impact of that performance differential, I constructed the following chart which shows the growth of $10,000 invested in each of the seasonal periods.

So, with this context in place let us ponder some different views about whether you should "Sell In May," or not.

1) Dow Closed At A 52-Week High On Last Day Of Aprilby Jason Goepfert via Sentimentrader

"The Dow has closed at a 52-week high on the last day of April seven other times in its history.The next three months showed positive returns two times, negative returns five times, with an overall average return of -1.6%. At its best point during the next three months, it gained a median +1.9%, while at its worst point, it lost a median -3.3%. The years were 1945, 1951, 1954, 1965, 1983, 1995 and 2011."

2) Dow At A Record: Time To Sell In May?by Adam Shell via USA Today

3) Why Investors Expect To "Sell In May" by Trang Ho via Investor's Business Daily

"But more important at this point is capital preservation and eventually re-establishing some exposure for the year-end rally, which may turn out to be the last leg of this bull market," Maierhofer said in an email. "There are some bearish divergences indicative of a slowing trend but not the kind of divergences usually seen right before major market tops."

4) 17 Reasons Not To "Sell In May"by Mark Hulbert via WSJ MarketWatch

"However, and some sectors historically have not adhered to the same seasonal pattern. That’s according to an academic study titled 'The Halloween Effect in U.S. Sectors,' written by Ben Jacobsen, a finance professor at Massey University in New Zealand, and Nuttawat Visaltanachoti, a senior lecturer in finance at that institution.

The industry groupings that stood out the most in their study were food and agriculture, leisure, multimedia, retailing and utilities.

One option would be to invest in ETFs benchmarked to those five. But another would be to focus on stocks within the sectors that are particularly compelling."

5)  Sell In May? Via ZeroHedge

As FBN's JC O'Hara explains, the “Sell in May” slogan heard around Wall Street has some truth behind it. The gist of the saying suggests it’s better to be out of the market come May and re-enter during the fall months.

"We ran the numbers over the last 20 years and found validity to the statement. We created a model that went long the market Jan, Feb, March, April, Oct, Nov & Dec. as well as a second model that went long the market May through Sept 30. We concluded that the May – Sept time period model, on average over the past 20 years, would have lost you money.

The majority of the time the market was unimpressive over those summer months. The majority of the markets returns were housed in the first model that was long the months into May and the months after Sept. While there were instances where May – Sept was negative, the risk adjusted returns suggests investors do not necessarily need to exit the market but should expect flat markets with little if any of the yearly gains coming during this time period. The real money was made during other 7 months of the year. As we approach May we are not in the SELL camp yet, but rather acknowledge the fact that a volatile, stagnant, sideways moving market is what history implies. Over the next few pages of this report we examine the past 20 years and highlight where the majority of returns are found."

The key chart in this analysis was the following which shows the seasonal tendency of market returns during"mid-term election years."

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As always have a great weekend.

Submitted by Lance Roberts of STA Wealth Management

Domestic demand, exports spice up masala market

Rising offtake of spice mixes and branded spices offer better profit margins for companies

Spices from India are going places, with exports on course to top $3 billion by 2016-17.

Led by creative marketing strategies to ensure high brand recall, spice majors are competing with their domestic counterparts through continuous innovations in packaging, strength in quality and a strong distribution network.

Several local companies have also made their presence felt in the international market, by following a dual branding strategy to cater to the Indian diaspora in the global market.

Indian brands bought out by international spice majors, such as MTR, have also been straddling both strata.

Sanjay Sharma, CEO, MTR Foods, told Business Line, “MTR leads the spices market in Karnataka and AP. We also export these products across many countries, and our popular products are sambar powder, rasam powder and puliogare, amongst others.”

Huge market

Incidentally, Oman is a larges buyer of Puliogare powder, followed by the UAE and South Africa. South Africa turned out to be the largest buyer of puliogare powder during April, with Bangalore accounting for 50.1 per cent of exports, according to available shipment data.

Within the country, the company has been competing with big time players such as MDH, Badshah and Eastern Masala, and has also gone in for diversification.

The Indian spices market is pegged at ₹40,000 crore annually, of which the branded segment makes up 15 per cent.

According to Technopak, the branded space is dominated by national brands such as Catch, Everest, Ramdev, among others.

“All these brands have focused on product packaging, product customisation to local taste and positioning around quality. They have also ensured innovative marketing strategies for high brand recall,” said Reetesh Shukla, Associate Director, Food Services, Technopak.

Readymade mixes

Increasing urbanisation paired with a rise in number of working women has reduced the time of cooking.

Consequently, home-makers have started demanding readymade spice mixes such as sabzi masala, garam masala, chicken masala etc.

This has augmented industry revenues, officials said, as both spice mixes and branded spices entail greater profit margins, as compared to straight and unbranded spices.

An official from Everest Spices, which exports 10 per cent of its products to the US, West Asia, Singapore, Australia, New Zealand and East Africa, said: “The total market size of branded spices is estimated at ₹6,600 crore, and is growing at 14 per cent annually. While the US is the main importer of Indian spices, contributing 16 per cent of the total export value, it is followed by China at nine per cent. The UAE and Malaysia are at six per cent, while Saudi Arabia, Germany, Sri Lanka, Singapore and the UK at four per cent each.”

Who's Buying, And Who's Selling ? The Great(est Fool) Rotation

We could yarn on for hundreds of words discussing the ins and outs of falling volumes and record-er highs in US equity markets as Treasury bond yields collapse, macro- and micro-fundamental data slumps, and the total nonsense with regard to 'cash on the balance sheets' when it is all levered to the max. Butwhen it comes to showing just who is buying the hope... and who is selling the hype, the following chart from BofAML sums it all up... institutional clients sold the most since January and the 4th most on record in the last week as retail clients continued their buying streak.

Institutional clients are dumping equities off to retail clients... thank you very much...

Last week, during which the S&P 500 was down 0.1%, BofAML clients were net sellers of $1.5bn of US stocks following a week of net buying.

Net sales were chiefly due to institutional clients, who have now sold stocks for the last five consecutive weeks and are the biggest net sellers year-to-date. Net sales by this group last week were their largest since January and the fourth-largest in our data history (since 2008).

Hedge funds were net buyers for the fourth consecutive week, and private clients also continued their net buying streak.

Source: BofAML

Gold price drops as holdings of top ETF fall to 5-year low

The gold price fell by more than $10 on Thursday after confidence in the US economy expressed by the Federal Reserve overshadowed the escalation of the conflict in Ukraine.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery last traded at $1,285.20 an ounce, near the lows of the day and down $11 from yesterday's close.

Gold's status as a hard asset and safe-haven during times of turmoil did not translate into buying despite news that Ukraine has re-instated military conscription after saying that it is in danger of losing the east of the country to pro-Russian forces.

The US central bank on Wednesday decided to continue to scale down its stimulus program following indications that growth in economic activity picked up recently after the weather-related slowdown in the first quarter saw GDP growth barely positive at 0.1%.

The news boosted the dollar and diminished gold's allure as a hedge against inflation and storer of wealth.

After an atrocious 2013 when GLD recorded only 17 days of inflows and 540 tonnes left the fund, the tide seemed to have turned in 2014

Investors also continued to pull money out of the SPDR Gold Trust (NYSEARCA:GLD), the world's largest physically-backed gold ETF accounting for over 40% of total holdings in the industry.

Holdings in GLD dropped more than 2 tonnes to 785.55 tonnes or 25.2 million ounces on Thursday, the lowest level since January 2009 and down 24 tonnes during April.

After an atrocious 2013 when GLD recorded only 17 days of inflows and almost 540 tonnes left the fund, the tide seemed to have turned early in 2014.

But after peaking at 821 tonnes in March, GLD became a one way bet again.

Buying of gold ETFs trust – fondly referred to as the people's central bank –  since 2003 when the first of its kind was launched in Australia played a huge part in gold's 12-year bull run.

Gold bullion holdings in global ETFs hit a record 2,632 tonnes or 93 million ounces in December 2012.

But last year the world's more than a 50 physically-backed exchange-traded gold funds and scores more gold futures-based trusts experienced net redemptions in excess of 800 tonnes collectively.

As gold declined 28% over the course of 2013 precious metals investment vehicles suffered depreciation in value of close to $80 billion.

Pentagon Admits "No Solution" To Replace Russian Rockets To Launch US Military Satellites

While the US is quick to demand the rest of the world turn its economic back on Russia - especially the Europeans, it appears they are discovering - just as Putin warned, the world is considerably more inter-dependent than they thought. Following Chuck Hagel's orders to review the Air Force reliance on Russian rocket engines used to launch US military satellites, Bloomberg reports the Pentagon admits it "has no great solution" to reduce its dependence on the Russian-made engine.

As Bloomberg reports,    

The Pentagon has no “great solution” to reduce its dependence on a Russian-made engine that powers the rocket used to launch U.S. military satellites, the Defense Department’s top weapons buyer said.

“We don’t have a great solution,” Frank Kendall, the undersecretary of defense for acquisition, said yesterday after testifying before a Senate committee. “We haven’t made any decisions yet.”

Defense Secretary Chuck Hagel ordered the Air Force to review its reliance on the rocket engine after tensions over Russia’s takeover of Ukraine’s Crimea region prompted questions from lawmakers about that long-time supply connection.

United Launch Alliance LLC, a partnership of Lockheed Martin Corp. and Boeing Co., uses the Russian-made RD-180 engine on Atlas V rockets.

As Putin warned - apparently correctly...

“The US is certainly one of the world’s leaders. At some point it seemed that it was the only leader and a uni-polar system was in place. Today it appears that is not the case. Everything in the world is interdependent and once you try to punish someone, in the end you will cut off your nose to spite your face,” he said.

Best And Worst Performing Assets In April And 2014

As we noted on the last day of March, April was supposed to be the best month for stocks, with an average return since 1950 of over 2%. It wasn't.

In fact it barely managed to eek out a positive return, treading negative MTD performance until the last few days.

Still, nothing compares to the rout of the laughable Greek stock market, which after generating scorching returns in the first quarter, tumbled in April by nearly 8%, and cut its YTD gains by more than half. In fact, Greece, with its stock market where a few oddlots can move the market by more than 1%, performed worse than even Russia's stock market - the same Russia which none other than the White House speaker Jay Carney told everyone to short. Curiously, while there were no sanctions announced against Japan, the Nikkei was in danger of losing almost as much as Russian stocks in the past month.

But it wasn't all doom: among the better performers were the FTSE, the Bovespa, and a bevy of commodities such as Corn, Wheat and the broader CRB Index. Here is some additional color from Deutsche Bank:

April was a generally positive month across the board for global financial assets, although with a handful of major losers. No single asset class stood out although equities and commodities had a relatively strong month with the top performers including UK (FTSE 100, +3.1% - helped by M&A), Brazilian (Bovespa, +2.4%) and Spanish (IBEX 35, +1.6%) Equity and Corn (+2.4%), Wheat (+2.3%) and the broader Commodity index (CRB, +1.6%). YTD commodities have performed strongly with Corn (+22% YTD) and Wheat (+18% YTD) the two best performing assets and the broad CRB commodity index returning +10.5%. The rest of the 2014-so-far top 5 is made up by Peripheral European Equities with the FTSE-MIB and Portugal General returning +15% and +14% respectively.

Fixed income performance sat in the middle of the pack in April with EU Fin Sub bonds continuing to lead the way returning +1.4% on the month and +5% YTD. Other strong performers in fixed income this month were Italian and Spanish government bonds and US IG Non Fin and US Fin Sub all returning around +1% on the month. This stronger performance marks a continuation of trends seen through 2014 so far with returns on Spanish govvies at +7.1% YTD, BTP’s at +6.5% YTD and US IG Non-Fin and Fin Sub of around +4.5% YTD.

Sterling continued to perform in April with GBPUSD returning +1.3% this past month. GBPUSD returns now stand at +1.6% on the year, only being beaten in  the G7 FX space by JPYUSD at +2.6%. GBPUSD’s been on a bull run since early June last year and is now around its post-2008 highs.

April has seen a few notable losers with the Greek Athex down -7.8%, the Russian Micex down -4.6% and the Nikkei down -3.5%. The weak Micex and Nikkei are continuing themes this year, now returning -13.1% and -11.5% respectively. Geopolitical risks and sanctions are continuing to weigh on Russia with fatigue impacting the Japan reflation trade. April’s weak Athex performance on the other hand marks a sharp divergence from 2014 performance pre-April as the index has given back much of it’s strong performance YTD. When we last wrote this performance review at the end of March YTD Athex performance was +15%, after April it now stands at +6%. However it is up +28%% over the past 12 months.

The full April performance by asset class:

A different pictures emerges in the YTD chart,where corn, wheat and Italy are the best performers, while Russia, Japan, Copper, Hong Kong and China round out the tail end.

Jim Reid's conclusion: "So now April's over, will it be sell in May and go away? Or buy in May and make hay.. We just made that one up. We don't expect it to catch on!"