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  Thursday, 2 Apr 2015 | 1:47 PM ET

Israel's stock market is walloping its neighbors

Posted By: Jeff Cox
Inside the Tel Aviv Stock Exchange
Ariel Jerozolimski | Bloomberg | Getty Images
Inside the Tel Aviv Stock Exchange

Despite the geopolitical turmoil in the rest of the Middle East, Israel's stock market has been a stellar outperformer.

In fact, the country's principal equity indexes are surging at time when its neighbors are declining. The Tel Aviv 100 and Tel Aviv 25 have registered double-digit gains for the year, while many others in the region have shown lackluster numbers that have worsened considerably in recent days.

The most recent leg up for the Israeli markets, and leg down for regional competitors, came after Prime Minister Benjamin Netanyahu's election victory last month. That came amid a general recovery for Israel stocks, which slipped in 2014 amid economic turmoil in Europe, which Israel relies upon to take its exports, and the prolonged Gaza conflict.

"As Europe seems to have stabilized and other export markets continued to grow, Israel started to hit bottom and began to turn around," said Brian Friedman, president of Israel Investment Advisors, which has a private fund that invests in the country.

Though the market dipped in the days immediately following the bruising election, the TA 25 is up 3 percent over the past week. It has gained 6.9 percent in the past month and has risen 12.1 percent year to date and 16.1 percent over the past 12 months, according to FactSet.

Economists also have been moving up estimates for gains in Israel's gross domestic product, currently at 3.5 percent.

"You have to remember, Israel, even though it sits in the Middle East, it's much more like a developed Western economy," Friedman said. "The rule of law exists (in Israel) and you can't say that for any other country in the region."

The country has been aggressive in efforts to expand its equity offerings.

»Read more
  Wednesday, 1 Apr 2015 | 1:00 PM ET

Gross rips 'hostile, artificially priced' market

Posted By: Jeff Cox

As Bill Gross sees it, investors face a tough time ahead trying to pick places to put money in a world where basically everything is mispriced.

Central banks that have kept rates low have helped boost asset prices, but the landscape will be different now that stimulus from the Federal Reserve and elsewhere is losing its impact, the Janus Funds portfolio manager said in his latest missive to clients.

Investors need to determine where the Fed and other central banks will keep rates in balance with economic growth—a number that Gross calls the "new neutral" and which he expects to stay around 2 percent from its current zero peg for the foreseeable future.

"The lower real rate/capital gains ocean liner has taken us into uncharted waters, but waters, which we must know, that are hostile to investors," he wrote in an examination of what future policy rates will have to be in light of the outlook for slow growth. "Knowing how to maximize return versus risk in these new waters will be key. There are at least several approaches, any one of which may be the correct one."

Gross himself knows how tough things have become.

»Read more
  Tuesday, 31 Mar 2015 | 2:10 PM ET

Byron Wien: Four market myths to rethink

Posted By: Lawrence Delevingne
Byron Wien
Adam Jeffery | CNBC
Byron Wien

Many investors believe a handful of myths about the future of the global economy, according to a veteran market strategist.

In a new commentary online, Blackstone Advisory Partners vice chairman Byron Wien wrote that observers may be getting four things wrong.

He argued that American's global dominance isn't over, as some believe; the price of oil will rise faster than many expect; Europe is not doomed to long-term slow growth and deflation; and the Japanese economy will actually be revived by the stimulus programs known as Abenomics.

"In talking with investors, I find four concepts prevail among the consensus that I believe may be wrong," Wien wrote.

"I decided to explore each of these to see whether the ideas are sound, or more in the realm of myths that have somehow gained credibility among investors, without significant factual support."

»Read more
  Tuesday, 31 Mar 2015 | 12:20 PM ET

Presidential election has found its punching bag

Posted By: Lawrence Delevingne
Jeb Bush
Richard Ellis | Getty Images
Jeb Bush

Ted Cruz made no mistake in highlighting his opposition to a set of educational standards known as Common Core in his first presidential campaign speech.

"Instead of a federal government that seeks to dictate school curriculum through Common Core," he said to applause from the Liberty University crowd on March 23, "imagine repealing every word of Common Core."

Formally known as the Common Core State Standards, the once low-key, bipartisan effort to improve math and literacy education has quickly transformed into a major issue for many conservatives like Cruz, now a Republican U.S. senator from Texas, as they believe it's just another example of government overreach.

It's also a way for Cruz and other politicians likely to vie for the Republican Party nomination—including Rand Paul, Chris Christie, Bobby Jindal and Scott Walker—to differentiate themselves from potential front-runner Jeb Bush. The former Florida governor is a long-time Common Core supporter, a topic detractors could seek to tie to his establishment credentials and political moderation.

That combination of factors has virtually assured that Common Core will be an important topic of debate ahead of voting in November 2016.

"It will be a major issue because of its symbolic importance," said Tom Loveless, who researches education policy as a fellow at the Brookings Institution, a politically centrist think tank. "It's red meat for the kinds of conservative activists that a number of the contenders on the Republican side want to appeal to."

»Read more
  Tuesday, 31 Mar 2015 | 11:33 AM ET

Ouch! Here's Wall Street's next headache

Posted By: Jeff Cox

The outlook for corporate profits is getting worse, and it's not just about the battered energy sector.

Banks, looked to as a bright spot for the upcoming earnings season, might not live up to expectations, according to an analysis from Goldman Sachs.

The firm's analysts have cut profit outlooks for three of the top four money center banks on Wall Street, representing about a 6 percent reduction overall and serving as a sobering sign that the earnings recovery after the financial crisis appears to be running out of steam.

"We believe lackluster 1Q earnings combined with pressure on out year consensus estimates from adjusting for a flatter yield curve sets up a challenging earnings season for money centers," analyst Richard Ramsden and others wrote in a research note.

The warning comes as the Street is preparing for a possible "earnings recession," or consecutive quarters of negative growth. S&P 500 profits collectively are predicted to decline nearly 3 percent in the first quarter, followed by another drop of about 1.8 percent in the second quarter.

»Read more
  Tuesday, 31 Mar 2015 | 1:59 PM ET

Want inflation? Check the Bacon Cheeseburger Index

Posted By: Jeff Cox
Bacon Cheeseburger
Steve Manson | iStock | Getty Images

If Fed Chair Janet Yellen wants to find inflation in the U.S. economy, she should just stop at a burger joint.

While traditional indicators show little price pressure, the fabled Bacon Cheeseburger Index, which tracks the cost of the gastronomic delight of the same name, is on an aggressive path higher.

In fact, the price has jumped 7.7 percent over the past year, according to calculations from brokerage Convergex, using government consumer price index data. ( Tweet This )

The biggest contributor to the surging price was a more than 17 percent jump in the cost of ground beef. Costs for bread, cheese and, to a lesser extent, bacon are on the rise as well. White bread posted an annual gain of 3.4 percent, bacon rose 0.2 percent and cheese was up 7.3 percent in February, according to the Bureau of Labor Statistics.

"Yes, we know the Fed can't make more cows or milk or pigs," Nick Colas, chief market strategist at Convergex, wrote in a report that examined several of what he called "off the grid" economic indicators. "But consumer attitudes regarding inflation are anchored in their shopping cart, as anyone who lived through the 1970s will tell you."

»Read more
  Monday, 30 Mar 2015 | 1:51 PM ET

Jumping on junk: Investors crazy for high yield

Posted By: Jeff Cox

The supply of U.S. companies with junk-rated debt is rising just as investor demand for higher yields is climbing.

Moody's reports a two-year high in company debt rated B3 negative or worse—a.k.a. junk—as part of a trend that has seen the list of 184 companies grow by 26 percent over the period. The rise has been led by oil and gas firms, which accounted for 12 of the 28 additions to the junk list in February.

What's more, the roster would be even longer but for companies falling off the list due to reasons including filing for bankruptcy. Of the 18 issuers no longer rated, 39 percent filed either for bankruptcy protection or "distressed exchange, and 33 percent withdrew, with just 28 percent getting off the list due to upgrades."

"This is a reversal from the previous two quarters, when most companies left the list via ratings upgrades," Moody's said. "If this reversal continues, it could signal tough times ahead for speculative-grade issuers."

Not so far, though.

Fueled by low default rates and generally favorable credit conditions, investors in 2015 have been pouring money into funds that invest in high-yield debt. In fact, the previous six weeks before the most recent week had the highest level of flows to junk funds since the financial crisis in 2008 and 2009, according to Morningstar.

Read MorePlay corporate bonds for the short term: Goldman

Flows to junk-focused funds have taken in a net $12.2 billion so far in 2015 as part of a broader interest in fixed income amid a turbulent stock market, Bank of America Merrill Lynch reported. In addition to the big cash attraction to junk, high-grade bond funds have seen net inflows of $36.4 billion.

High-yield bonds have outperformed both stocks and fixed income as a whole. The SPDR Barclays High-Yield Bond exchange-traded fund is up 2.3 percent year to date, outpacing the Barclays U.S. Aggregate Bond Index, which is up 1.5 percent, and the S&P 500, which has climbed 1.1 percent for the year, thanks primarily to a big rally Monday.

ETFs that focus on high yield have seen solid inflows. A look at the top 10 funds by asset size, flows and performance for the year:

»Read more
  Friday, 27 Mar 2015 | 1:50 PM ET

How the Fed is 'screwed,' and what happens next

Posted By: Jeff Cox

Call it a box, or perhaps even a paradox, but the Federal Reserve finds itself in an uncomfortable position heading into its first rate-hiking cycle in nearly a decade.

A central bank that has prided itself on transparency during its ultra-easy cycle following the financial crisis is now doing an awkward dance with a market not quite sure what to make of the road to tightening financial conditions.

The essential problem is this: When the Fed could have raised rates it didn't want to. Now that it wants to raise rates, it may not be able to, at least not without causing substantial turmoil in the same financial markets it has sought so strenuously to soothe.

The Fed hasn't raised rates since June 2006.

"There will never be a good time to raise rates off zero when you've been there for six years," Peter Boockvar, chief market analyst at The Lindsey Group, told CNBC. "The Fed's screwed, essentially."

The extension of the central bank's dilemma, or box, or paradox, goes like this, as highlighted in Boockvar's argument: Zero interest rates were a response to the worst U.S. economic crisis since the Great Depression. The economy, though, is far removed from its crisis days. The recession ended in mid-2009, gross domestic product has been on a steady if uninspiring march higher and financial markets, which have received by far the most benefit from Fed programs, have soared. While all that happened, the Fed could have begun the tightening process without disrupting the recovery.

»Read more
  Thursday, 26 Mar 2015 | 10:45 AM ET

Fed policies have cost savers $470 billion: Study

Posted By: Jeff Cox

The Federal Reserve's efforts to stimulate the U.S. economy after the financial crisis ended up costing savers nearly half a trillion dollars in interest income, according to report released Thursday.

Since the central bank dropped interest rates to near zero at the end of 2008, savers have labored under plain-vanilla bank accounts and money market funds that have yielded close to nothing. Critics have long said the Fed's quantitative easing efforts have boosted asset prices, particularly in the stock market, but exacted severe costs across other parts of the economy.

In a landmark report, Swiss Re quantifies just how much savers and others have languished while the policy has pushed the Fed's balance sheet past the $4.5 trillion mark but failed to generate above-trend economic growth or substantial core inflation.

The reinsurance firm put the number at $470 billion in the 2008-13 period studied, so the number is likely even higher now. (Tweet this)

Swiss Re called the impact of low-rate dollar-cheapening policies "indisputable. Meanwhile, the impact of foregone interest income for households and long-term investors has become substantial."

»Read more
  Wednesday, 25 Mar 2015 | 1:37 PM ET

There's a huge sentiment split building in market

Posted By: Jeff Cox

Professional investors and the mom-and-pop crowd have developed a starkly different view about which way stocks are heading.

The pros are strongly bullish while the retail side is at its most pessimistic in nearly two years, according to separate investor sentiment surveys that paint a puzzling picture of the market climate. (Tweet this)

In the most recent Investors Intelligence survey, the percentage of those bullish actually increased to 56.6 percent from 52 percent in the previous week's sampling period. That contrasted against just 14.1 percent on the bearish side, a number that has remained pretty constant over the past four weeks.

Investor Intelligence takes the temperature of newsletter authors and is thus considered a gauge of professionals.

In contrast, the American Association of Individual Investors survey showed bulls all the way down to 27.2 percent. That number was the worst since April 2013, just as the S&P 500 was setting up for a dip of more than 7 percent in only a month's time. That bullish reading was off 4.4 percentage points from the previous week's reading.

AAII bears—or those who believe the index will be below its current level in six months—increased to 31.5 percent, a gain of 6.1 percentage points. Neutral sentiment fell 1.6 percentage points to 41.4 percent, well above its historical norm of 30.5 percent.

»Read more

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