More Evidence Tech Pullback Is Just Reversion To Mean

The sell-off in technology is more about market reversion to the mean than it is indicative of some gloom and doom scenario where technology stocks lead the rest of the market lower.

Credit Suisse just released a report to clients where they are neutral to slightly cautious on technology stocks for the next 3 months, but remain positive longer out.

There are many bottoms-up drivers in the technology sector right now including the new iPhone, continued increase in cloud usage, greater adoption of artificial intelligence across various sectors, and autonomous driving. Technology adoption and market penetration are likely to increase over the next couple of years.

The S&P 500 is dominated by a few big tech companies. Innovations such as more automation in the grocery industry from Amazon, the iPhone 8, and Tesla’s Model 3 are catalysts for the S&P 500 to move even higher.

Reversion To The Mean

The green line is what I would calculate the mean to be at. As you can see, QQQ has overshot the mean over the last few months and so a move back towards the 10 year mean line is normal.

Fiscal policy will also be a catalyst for continued growth such as tax reform. The medical device tax, investment tax, tanning tax, Medicare Hospital Insurance surtax, the health insurance fee and tax on brand pharmaceutical manufacturers, all will likely be repealed at some point in the future.

Credit Suisse set negative expectations for consumer goods. Stocks that trade in the consumer goods sector are likely going to be stocks we should avoid. Fundamentals and valuation are likely to continue to deteriorate in clothing, department stores, grocery, and packaged food.

United States Public Debt Should Stop Congress Recess

If Congress goes on their one-month vacation in August without coming to a deal on the United States public debt, I think the stock market goes into a downward correction. We may not even need to wait that long. Congress has about 6 weeks to come together and reach a deal to raise the debt ceiling.

United States Public Debt Scam

What Democrats did was to run up the national debt so high, that austerity would be forced on the next administration which would all but assure that person a one-term President. We know this because Democrats admit asking Yellen to keep interest rates low and to not raise them until after the election.

Credit Suisse said that they think markets may well be able to continue without too much consternation through most of July, but if it becomes apparent that Congress will head out on its August recess – which lasts the entirety of that month-having made no progress, then fears of a delayed or missed payment should start to build.

Why is Congress going on a one-month vacation before raising the debt ceiling? You don’t use the debt ceiling to enforce austerity. That’s like using Accounts Payable to control spending costs.

Analyst Actions and Breaking News

Overnight Analyst Actions:

Raised: None

Initiates: None

Cuts: None

Overnight Headlines By Ticker:

PLX Protalix Biotherapeutics Inc

12/27 07:30 Receives confirmation of order for over $24M of alfataliglicerase to treat gaucher patients in Brazil

PTLA Portola Pharmaceuticals

12/27 07:49 Price Target raised to $29 from $20 at Credit Suisse, reiterates Neutral rating

SGEN Seattle Genetics

12/27 08:00 Announces clinical hold on several Phase 1 trials of Vadastuximab Talirine after deaths [SELL NO LONGER COVERING]

12/27 07:55 Trading halted; news pending; to resume trading at 08:30ET

Terrifying US Pension Fund Charts

Pension funds in the US could be close to a collapse. There is an estimated $1.9 trillion shortfall in U.S. state and local pension funds because of low-interest rates and a sideways US stock market. Even stocks falling overseas is a problem for pension funds.

Credit Suisse published the chilling chart below on the funding gap at the largest 100 US pension funds.

Bloomberg writes

Pensions count on annual investment gains of more than 7 percent to cover much of the benefits that come due as workers retire. But public plans had a median increase of 1 percent for the year ended June 30, the smallest advance since 2009, when they lost 16.2 percent, according to the Wilshire Trust Universe Comparison Service.

Now it seems like there is a run on the Dallas Police and Fire Pension as employees try to claim benefits before the system becomes insolvent.

Pension funds are starting to drop hedge fund investments. Turn To 10 writes

Rhode Island plans to scale back its investments in hedge funds by more than $500 million over the next two years, and reallocate those funds to more traditional investments with lower fees.

Pension funds like Rhode Island are starting to be more defensive and are hunkering down. The problem though is that defensive US Treasury bonds mean way below 7 percent returns which means more shortfalls in funding are coming.

There’s no way pension funds can stay above water in an environment with low-interest rates and with equity markets at valuations that are sky high.

But wait, Democrats say everything is good, just look at consumer confidence that came out this week at 104.1.

consumer-confidence

There is massive offshoring of good paying US jobs, stagnant wages, soaring costs of health care and education, contraction in manufacturing, falling retail sales, and consumers pensions are dangerously close to collapse. Meanwhile, consumer confidence is hitting multi-year highs? Consumer confidence is starting to look like just another tool of public manipulation that’s out of touch with reality on the street.

Kinross Gold Corporation Strike Ends at Tasiast Mine

June 13, 2016: Strike ends at Kinoss Gold Corporation’s Tasiast Mine. The strike was settled quickly and so it is not expected to impact annual guidance. The strike by unionized employees at its Tasiast mine that began on May 24, 2016 has ended. Striking employees began returning to work on June 11, 2016 and negotiations with the staff delegates on a new collective labour agreement and other outstanding items are expected to re-commence within ten days. Employees retain the right to strike during negotiations subject to Mauritanian labour laws.

The strike is not expected to impact the Company’s annual regional guidance and did not affect development of the Tasiast Phase One expansion.

April 11, 2016: RBC raised Kinross Gold Corporation to Outperform from Sector Perform, and sets a price target of $4.75. The price target was raised to $4.75 from $3.50. RBC analyst cites upward revision to firm’s gold price deck.

More Kinross Gold News

March 30, 2016: Kinross Gold Corporation to proceed with phase one of the Tasiast Expansion. Kinross Gold is proceeding with the Phase One expansion of its Tasiast mine in Mauritania. Phase One is expected to increase mill throughput capacity from the current 8,000 tonnes per day (t/d) to 12,000 t/d, while significantly reducing Tasiast’s operating costs and increasing production. Preparations for Phase One construction to install incremental crushing and grinding capacity to the existing carbon-in-leach (CIL) circuit, which includes an oversized semi-autogenous grinding (SAG) mill and gyratory crusher, will begin immediately. Phase One is expected to reach full production by the end of Q1 2018 with estimated capital expenditures of approximately $300 million.

February 09, 2016: Credit Suisse raised Kinross Gold Corporation to an Outperform rating from Neutral, and set a price target of $2.75. Credit Suisse analyst cites potential margin expansion and valuation.

February 7, 2016: BMO Capital Markets raised Kinross Gold to Outperform from Market Perform.

Kinross Gold Corporation engages in the acquisition, exploration, and development of gold bearing properties. Kinross is a Canadian-based senior gold mining company with mines and projects in the United States, Brazil, Russia, Mauritania, Chile and Ghana.

KinrossGold published this video about their company:

KinrossGold published this video about their 20 years in Russia:

KinrossGold published this video about their Alaskan operations: