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Five Things You Need to Know: End of the Beginning? China Heat, See ya EOs, Metric-lovers, and The Pill

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

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Minyanville's five things you need to know to stay ahead of the pack on Wall Street:

1. The Beginning of the End? Or the End of the Beginning?

Two important technical measures of stock market participation are now negative. Is this the beginning of the end? Or just the end of the beginning?

  • The bullish percent index for the NYSE and the bullish percent index for the Nasdaq Composite both turned negative on Wednesday, meaning to some technicians that the broad stock market is now controlled by supply.
  • What are bullish percents? Bullish Percent charts are simply charts that measure the percent of "something" doing "something." For more on the concept see Minyanville's NYSE Bullish Percent Primer here.
  • This is the first time these supply and demand indicators have both been negative since October.
  • Of course, after turning negative in October these indicators quickly turned positive again in December 2005. In fact, since October the iShares Total Market Index is up 4.3%, the Dow Jones Industrial Average is up 6% and the S&P 500 is up 3.4%. Why should this time be different?
  • According to Minyanville Professor Kevin Depew, there are a confluence of factors that make this turn riskier. "In October, the point & figure patterns in the broad indices were not negative," he says. "The S&P 500 had actually formed a bullish pattern, called a shakeout."
  • "Moreover, we now have longer-term DeMark indicators flashing monthly sell signals across many broad indices and sector indices, some for the first time since 1999 and 2000," he added.
  • Is this time different? "In terms of risk, it is very different," Depew said. "The negative divergence between most major stock indices making new highs just a week and a half ago, while their underlying bullish percent indicator charts, and I'm talking the bullish percent charts for everything from the Dow to the Nasdaq-100 to the S&P 500 to the Nasdaq Composite, are making lower highs, is a hallmark of a weak advance driven by a diminishing number of stocks."


2. China Fixed Investments to Become Less... Fixed?

China's urban fixed-asset investment in the first four months of the year rose 29.6 percent from the same period a year earlier, compared with a 27.5% increase in the same period last year.

  • What are urban "fixed-asset" investments? These are investments in things such as factories, roads, railroads and power generation.
  • On the one hand, China needs investment in transportation networks and power grids, but the government is struggling to keep other industries from developing overcapacity and supply, which will lead to deflation in certain industries.
  • For all of 2006 the government has been aiming for 18% growth.
  • This figure is significantly higher than what Chinese officials want to see.
  • On April 27 the central bank raised its one-year lending rate to 5.85 percent from 5.58 percent, partly in an effort to withdraw liquidity.
  • Meanwhile, money supply jumped 18.9% in April, with lending more than doubling and reaching two-thirds of the full year target, according to government data.
  • According to Bloomberg, the central bank sold 100 billion yuan of 1-year Treasury bills yesterday to withdraw some liquidity.


3. C(ya)EO

Global CEO turnover rose to a new record in 2005, according to a survey from Booz Allen Hamilton.

  • The survey of 2,500 of the world's largest public companies found that 15.3 percent of chief executives left office in 2005.
  • That rate checks in 4.1 percent higher than 2004.
  • It's a whopping 70 percent above the turnover rate in 1995!
  • According to Reuters, at that rate one in seven CEOs will be out of a job next year.
  • The survey says M&A accounted for a good portion of the 2005 turnover, although increasingly activist shareholder boards and CEO poaching are drivers of the increase as well.


4. Japan Increases Crude Reserves

The Japanese government plans to increase national oil reserves 40 percent from current levels. So much for elasticity of demand.

  • The Japanese government plans to increase national oil reserves to the equivalent of 120-130 days of domestic consumption, AFX News reported, citing unidentified sources from the Nihon Keizai Shimbun.
  • The Japanese national oil reserve target is currently 51 million kiloliters, about 90 days of domestic consumption.
  • The government wants to increase that to about 70 million kiloliters.
  • Do you know how many gallons of crude oil that is? No. Of course you don't. Because you, like us, are from America, where knowing metric conversions is a symptom of Communism.
  • Hmmm, I wonder if any Minyanville Professors know how many kiloliters are in a gallon? Could there be any metric-loving commies in the Ville?!?! Say it ain't so!
  • We decided to find out and do a quick survey of a few of our professors online this morning.
  • Minyanville: Do you know how many gallons are in a kiloliter?
    Prof. Bennet Sedacca: No.
    Minyanville: Good.
  • Minyanville: Do you know how many gallons are in a kiloliter?
    Prof. John Succo: (long silence) 450ish?
    Minyanville: Probably.
  • Minyanville: Do you know how many gallons are in a kiloliter?
    Prof. Adam Warner: I did at one time in my life if that helps.
    Minyanville: So you have renounced Communism, then?
  • Minyanville: Do you know how many gallons are in a kiloliter?
    Toddo: Not for $1,000,000.
    Minyanville: You are a true patriot.
  • Minyanville: Do you know how many gallons are in a kiloliter?
    Prof. Kevin Depew: Gallons of what?
  • Minyanville: Do you know how many gallons are in a kiloliter?
    Prof. Scott Reamer: 264.172, why?
    Minyanville: No reason, comrade.
    Prof. Scott Reamer: Comrade?
  • Minyanville: Do you know how many gallons are in a kiloliter?
    Prof. Fil Zucchi: 264.
    Minyanville: So you're just going to keep that leftover .172 for yourself?
  • Minyanville: Do you know how many gallons are in a kiloliter?
    Prof. Vitaliy Katsenelson: 2.7 (or so) kiloliter per gallon? Wait, a kilo is 100. No 1000.
    Minyanville: Easy there, Copernicus.
    Prof. Vitaliy Katsenelson: The American measuring system is really, really bad!


5. The Pill

A Texas company claims it has a "pill" that can boost gas mileage by 25% or more.

  • Texas Attorney General Greg Abbott on Wednesday announced a lawsuit against BioPerformance Inc. for allegedly promoting a pyramid scheme to sell fake "gas pills."
  • BioPerformance web site promotes individuals selling the fuel pills as a home-based business.
  • According to the BioPerformance website, a container of 80 pills costs $75.
  • But wait there's more. There's so much more. Companies making similar claims have cropped up across the country from Connecticut to N. Carolina.
  • I guess it's true what they say. The bigger the headache, the bigger the pill.



THIS CONTENT IS FOR EDUCATIONAL PURPOSES AND IS NOT INTENDED AS ADVICE.

Minyanville contributors may trade securities that are discussed on the site, both before and after the articles are published and/or may have a position in such securities for either personal or firm account(s). Minyanville contributors will indicate whether he or the firm has a position in stocks or other securities in any of the companies he discusses in an article. He will not disclose his or the firm's ownership of any securities issued by companies that are not discussed in an article. The disclosures will be accurate as of the time of publication of an article and may change at any time thereafter without notice to the reader.

The information on this website reflects an analysis of market conditions by Minyanville contributors and should not be interpreted as or deemed to be a recommendation to any investor or category of investors to purchase, sell or hold any security. Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Minyanville contributors will not respond to requests for individual and specific investment advice.

The views expressed on this website are solely those of the writers whose articles appear on this site and do not necessarily reflect the views of the Fund or of any other person except where expressly indicated.

Copyright 2006 Minyanville Publishing and Multimedia, LLC. All Rights Reserved.

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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