AN UNLIKELY CHOICE

French President Francois Hollande's recent approval rating dropped to 25%, a number the recent mid-term local elections highlighted. Now it's a matter of what if any changes Hollande will be able to engineer given the divisiveness afoot in the country.

One of the pitfalls Hollande and his newly chosen prime minister face is hardly unique or new: perception. Despite the calls for necessary change, what with all the checks and balances, the chances of any real change appear unlikely.

http://www.spiegel.de/international/europe/french-prime-minister-manuel-valls-faces-tough-job-in-shadow-of-president-a-963271.html

SAY GOODBYE TO BUYBACKS

For the past few years buyback have been much in the news, often cited as providing a boost for equities. Well, could that trend be ending? Here's an interesting read from Business insider on the subject.

Buybacks May Be Coming To An End (Business Insider)

"The financing gap for the non-financial corporate sector has remained open since Q4 2008; i.e., capital expenditures have been running below the level of internal cash flow generation," Societe Generale's Aneta Markowska told Business Insider. "Rather than investing in new equipment and structures, businesses have used their cash positions to buy back stock or to grow through acquisitions."

"This process, however, may be coming to an end. The ratio of the market value of equities to the replacement value of tangible assets (or the so-called Tobin Q ratio) has increased significantly in the past year and now stands at its highest levels since 2000. With equity values currently estimated at 25% above replacement value, expanding organically to make a lot more economic sense than expanding through acquisitions or stock buybacks."

Read more: http://www.businessinsider.com/financial-advisor-insights-april-10-2014-4#ixzz2yXBBcn6e

FORGET BUTTER SPREAD THE ANGST

The angst spreads.

Call it deflation angst. See Draghi's drag may be coming to an end.

Today's WSJ has caught the virus, saying the Fed hopes to "push very low inflation from 1% toward 2% level that officials associate with healthy business activity."

All this central bank hand wringing backed up by data that, at best, can only be defined as amorphous is probably the best contrarian sign central bank seers will prove when all is said and figured they are in their usual spot--behind the curve.

So e might call all this central banker concern pessimism. We call it over enthusiasm to the down side. Look around you'll find plenty of inflation starting wages that have been petrified for years. The proof isn't in the pudding; it's in the measuring.

http://online.wsj.com/news/articles/SB10001424052702304058204579491661272647786?mg=reno64-wsj

CONTRARIAN INDICATOR

Chart from Business Insider may tell the real tale about economic recovery. The chart represents revenue at discount store Family Dollar FDO. When things get mean and nasty consumers go slum shopping, as it's called in the retail industry. And when the economy picks up, well, you get the idea.

THE DRAG MAY BE OVER

Some observers seem to believe Mario Draghi, the would-be EU's answer to the U.S.'s Ben Bernanke, looks as if he's about to quit dragging his monetary-policy feet and cause if he can a little inflation in the EU zone.

EU area inflation is the weakest its been in four years increasing year-over-year in March just 0.5%, hardly enough to ward off all the concerns there about more deflation. So when is when, this June some are saying, the head of the ECB will ply his hoped-for monetary magic. 

The longer this drags on, however, the more heat Draghi and his merry band of central bankers can expect. 

http://www.bloomberg.com/news/2014-04-09/draghi-seen-easing-policy-by-june-as-ecb-readies-rate-cut.html

COMING UP ALUMINUM

It's spring and besides the expected flowers aluminum demand may be soon be spouting if one can believe the earnings report today from Alcoa (AA).

Earnings for Alcoa rose 3.5% to nearly $13/share, $12.97 to be exact, the company reported. The news carried some significance since Alcoa is the first in the S&P 500 to report.

The company also forecast rising demand for the light metal that's used in a variety of manufacturing, saying demand will outstrip production in 2014. On the one hand that might not be saying much since there's been a drastic cutback in production. On the other hand, time will tell.

Alcoa's news boosted other raw materials as they joined health care  companies to rally more than 1.4% to push other equities higher. Biotech was another winner as the Nasdaq Biotech Index spurted 3.6%.

Two big money center banks, JP Morgan and Wells Fargo, are up next when they report this Friday.

REACH FOR YIELD

"Reach for the sky," use to be a popular term in the days all of those old black and white westerns whenever the bad guys were robbing the innocent or unwary.

Today, there's a new term, Reach for the yield, thanks to wayward politicians and bumbling central bankers. But one thing hasn't changed. It's still a holdup.

http://blogs.marketwatch.com/thetell/2014/04/09/greece-returns-to-bond-markets-but-buyer-beware/

SHRINKAGE

Though this is hardly new it's nice to see that others are finally catching on. Someone blogged recently that $120,000 today is not that high of a living standard; in fact, it's pretty average. In the 1980s that same $120,000 income put one near the top 1%.

In case you don't recognize it, that's inflation. And here's another example, Shrinkflation.

http://www.cnbc.com/id/101526290

KING COPPER

Someone once suggested that studying copper was like getting a doctorate in investing, so widely is the industrial metal used in the world economy.

Last month the price of copper hit a three and half year low as worries about a China slowdown captured investor attention. Down nearly 10% so far this year investors keep looking for a bottom.

http://www.marketwatch.com/story/antofagasta-copper-price-may-have-found-a-bottom-2014-04-08?dist=afterbell

ENOUGH SAID

Fred Schwed, a stock broker who was kicked out of Princeton for having a girl in his room, wound up on Wall Street just before the Great Crash of 1929. He later wrote what has become a classic over the years, Where are the Customers' Yachts?

A quote from Schwed's book:
“When there is a stock-market boom, and everyone is scrambling for common stocks, take all of your common stocks and sell them. Take the proceeds and buy conservative bonds. No doubt the stocks you sold will go higher. Pay no attention to this— just wait for the depression which will come sooner or later. When this depression— or panic— becomes a national catastrophe, sell out the bonds (perhaps at a loss) and buy back the stocks. No doubt the stocks will go still lower. Again pay no attention. Wait for the next boom. Continue to repeat this operation as long as you live, and you’ll have the pleasure of dying rich.”

Schwed went on to write a successful children's book about which his publisher wrote:

Fred, Jr. Schwed

Fred Schwed, Jr., was a professional trader who had the good sense to get out after losing a bundle (of mostly his own money) in the 1929 crash. Some years later, Schwed published a children's book titled Wacky, the Small Boy. Wacky became a bestseller, and Schwed went on to draw further on his experience in writing Where Are the Customers' Yachts? His publisher said of him, "Mr. Schwed has attended Lawrenceville and Princeton and has spent the last ten years on Wall Street. As a result, he knows everything there is to know about children."

Enough said.