90 seconds at 9 am: Odd signals

Germany sinks; China car market zooms; VIX very low; BIS ponders tighter bank standards; bonds popular; NZ$1 = US$0.87.6, TWI = 81.5

8th Jul 14, 7:32am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including news of an eerie calm in equity and bond markets.

Overnight, data out in Germany revealed that their industrial production saw its biggest drop in two years in May, weighed down by sharp falls in the construction and manufacturing sectors. The fall was a surprise, with the most economists expecting no change in their industrial output for that month.

Going the other way, car sales in China rose a remarkable +14% in June. What was impressive is that it is the lower end of the market that is booming, the 'everyman' sector. More steel is now used in China for cars than for urbanisation. It's a dramatic spurt of cosumerisation.

Perhaps it is time to be afraid - the calm before the storm you might say - but equity investors are showing no fear at all. The 'Fear Index' - the CBOE VIX (or volatility Index) is unusually low and back at levels last seen in 2005-6.

At the BIS, regulators are considering new rules that would prevent banks from treating sovereign debt as risk-free, and end the practice whereby banks themselves judge the credit risk of their assets. That would be especially dangerous for European banks, but would also have worldwide implications for bank capital, bank's willingness to make loans to higher-risk customers (like small business), and the cost of capital for all banks.

Investors also seem to be ignoring market signals that interest rates are rising and are piling back into bonds. Billions are moving back into bond funds on a daily basis. The standard advice is that these investors are risking heavy losses if bond yields rise.

Overnight, yields on the benchmark UST 10 yr bond yield actually fell and are now at 2.61%. Both the gold and oil price fell with US oil price slipping closer to US$103/barrel and Brent is down to US$110/barrel a level it has been at for more than three years. Gold is down to US$1,313/oz.

We start today with the NZ dollar higher at 87.6 USc, and 93.5 AUc. The TWI is now at 81.5 and still very close to its all-time high set eleven days ago.

If you want to catch up with all the changes yesterday we have an update here.

The easiest place to stay up with today's event risk is by following our Economic Calendar here »

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1 Comments

by south paw | 8th Jul 14, 8:02am 1404763347

"equity investors are showing no fear at all."

Here's another 'odd signal' of how insane things are on Wall Street and a reality check on all the "DOW at 17000: Growth Growth Growth! Economic recovery!" propaganda:

CYNK Technology: Promoters Push Market Cap To $655 Million Despite $39 In Assets And No Revenue; 100% Downside

[Actually it is now $1 billion cap.]

Paid promoters have helped push CYNK market cap to $655 million after a 3,650% increase in the share price on Tuesday.
CYNK had assets of just $39 (no zeros omitted) as of March 31, 2014 and a cumulative net loss of $1.5 million. The "company" has no revenue.
CYNK claims that it is "a development stage company focused on social media." However, the "company" does not even have a website and has just one employee.
With no assets, no revenue, and no product, CYNK has no value. Author expects that CYNK shares are worthless.

72% of CYNK shares are owned by Javier Romero who is listed as president, secretary, treasurer and director since February 20, 2014. Romero purchased these shares from the former president, secretary, treasurer and director, Marlon Sanchez. I have not been able to find any background information on Mr. Romero. I attempted to contact the company at the number listed but was unable to reach anyone (strangely there was no voicemail).

In a world of heavily promoted stocks with insane valuations, CYNK stands out as being one of, if not the, most egregious example of promoters driving a worthless company into the stratosphere. When day-traders move on, CYNK shares are headed back to pennies.

http://seekingalpha.com/article/2274553-cynk-technology-promoters-push-market-cap-to-655-million-despite-39-in-assets-and-no-revenue-100-percent-downside