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Five Things You Need to Know: Where We Stand; The Trouble With India; It's Hammer Time; Real Estate and the Terrible, Horrible, No Good, Very Bad Day; Prioritization Problem?


What you need to know (and what it means)!


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Where We Stand

As we open the week, here is where we stand with the major bullish percent indicators (for a brief two-part tutorial on how to read and understand point and figure bullish percent charts, go here):

The charts above are courtesy

As well, charts S&P sector bullish percent charts. The principles are the same for the sectors. A chart in Os indicates supply in control of that particular sector. A chart in Xs indicates demand in control. As with the market bullish percents the risk levels 70% and above high risk, 30% and below low risk, are important.

Below are some important negative sector bullish percent readings:

Are there any positive sectors? Two... barely.

2. The Trouble With India

Crumbling roads, jammed airports, and power blackouts could hobble growth in India, says BusinessWeek in its most recent cover story.

  • Among problems with India outlined in the most recent BusinessWeek cover story is an infrastructure deficit "so critical that it could prevent India from achieving the prosperity that finally seems to be within its grasp."
  • Inflation is running at a two-year high of 6.7%.
  • As much as 40% of farm produce is lost because it rots in the field or spoils en route to consumers due to poor transportation networks.
  • Nearly all sectors of the country's management are riddled with graft.
  • And just about every foreign company operating in India has a horror story of the hardships of doing business there, the magazine says.
  • Really, could things in India be made to sound any worse?
  • With that litany of woes we surely don't want to hold any India-related equities investments, right?
  • Well, as if on queue, there are at least a couple of technical market indicators saying the opposite.
  • The benchmark India Sensex Index recently recorded a DeMark TD-Sequential buy setup reading, its first since June 12.
  • And the bullish percent index for India stocks just reversed up to Xs (positive) at 18%, according to the research firm Dorsey Wright, its lowest level since June.

India Sensex Index

3. It's Hammer Time

Also in BusinessWeek this week, how the Fed's rate hikes have now turned into a regressive tax on weak borrowers.

  • Remember the Fed's conundrum?
  • The Fed's conundrum was basically this: Why have long-term rates barely moved even as short-term rates were boosted by four percentage points, the biggest move for short-term rates since the 80s?
  • No one talks much about The Conundrum these days, but BusinessWeek notes that the stagnancy of long-term rates has allowed corporations and households with good credit to switch into long-term loans with attractive rates while those with poor credit, relying heavily on short-term loans, have seen their loan payments skyrocket.
  • Do with that "class division" what you will, (and make no mistake, good credit/weak credit is a class division), but what interests us more are the stunning numbers the article lays out for the road ahead.
    - About $265 billion of subprime loans are scheduled to reset this year.
    - Many vulnerable homeowners may soon be paying 11% or 12% on their mortgages, while those with good credit can obtain 30-year loans at a little over 6%.
    - Interest payments on corporate debt have risen only by $30 billion since 2004, while profits have grown by more than $300 billion.
    - Only 28% of nonfinancial corporate debt is tied to short-term rates now.
  • Even worse than the numbers is this chilling statement: "Regulators allowed this problem to develop and only now are cracking down."
  • Perhaps nothing is scarier than "regulators cracking down."

4. Real Estate and the Terrible, Horrible, No Good, Very Bad Day

It was a bad weekend all the way around for real estate.

  • BusinessWeek brought out the Fed Hammer.
  • The New York Times warned that not only does a "crisis" loom in mortgages, but that even high-end real estate is facing troubles.
  • Add to the list comments on Friday from Fed Governor Susan Bies, who said the nation's banks are only now beginning to feel the pain of mortgage defaults.
  • She was quick to add, however, that problems in the mortgage market are well- contained, according to Bloomberg.
  • Outside of the housing and auto industries, "the economy is strong,'' Bies said.
  • So at least we got that going for us.

5. Prioritization Problem?

According to Hershey's (HSY), more than half of Americans surveyed said that if stranded on a desert island, they'd rather have an unlimited supply of Hershey's Kisses Dark Chocolates than their favorite book, the St. Petersburg Times reported.

  • What about a boat?

    It's a question of priorities.
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