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WSJ: Venezuelan Bolívar Trades 80% Weaker Than Official Rate

       The Wall Street Journal reports,"Venezuela’s bolívar traded nearly 80% weaker Monday compared with the country’s fixed official exchange rate, in a new currency market unveiled by the government to make dollars more accessible and ease shortages of food and consumer goods".

"Dollars changed hands at an average rate of 51.86 bolívares in the debut of the foreign-exchange market, dubbed Sicad II, the Central Bank of Venezuela said.

The new rate, which will also be a reference rate for tourists, came in close to the black-market rate, which on Monday sat at 58.63 bolívares to the dollar, according to DolarToday.com, a website that tracks the market".

President Nicolás Maduro’s government launched Sicad II to get more dollars readily available to locals and weaken a thriving currency black market, which it says is part of an effort by its foes to destabilize the economy.

“Mega-devaluation is a hard blow to the incomes of all Venezuelans,” opposition leader Henrique Capriles said in a Twitter message. Calling it “Nicolas’ black Monday,” he accused Mr. Maduro’s regime of trying use the country’s political tensions as a cover to unveil an economic adjustment that punishes average citizens. “The government doesn’t want us to talk about it but we won’t let that happen,” Mr. Capriles said.

Devaluing the currency helps the government fetch more in local currency terms when it converts dollars earned through overseas oil sales and helps narrow a fiscal deficit estimated at 15% of gross domestic product.

Mr. Maduro said the new market is expected to supply as much as 8% of Venezuela’s dollar needs.

Despite welcoming the move, many economists said the new market isn’t likely to be enough to settle the economy’s imbalances or meet dollar demand. “I give this market a short life,” said Angel Garcia Banchs, director of Caracas-based consultancy Econometrica, adding that local people selling dollars will still want to go to the black market, where they can fetch more in bolívares than in Sicad II.

WSJ: Shiller Metric Carries Warning for Stocks

        The Wall Street Journal reports,"many have quibbled with Yale professor Robert Shiller's use of a cyclically adjusted price/earnings ratio. Few can fault his timing in calling out perhaps the greatest stock mania of all time with the publication of "Irrational Exuberance" in the spring of 2000, though".

"Mr. Shiller's technique uses a decade of inflation-adjusted earnings to derive a P/E ratio. That is in contrast to the more common practice of basing it on a year of analyst forecasts. By his measure, stocks now trade at 25.5 times earnings, 54% above the average going back to 1881.

Peaks in this measure have come before downturns in 1929, 2000 and 2007, but also many times in between. The Shiller P/E is thus no market-timing tool. Still, a look at the big picture should give pause".

The ratio is now in the top tenth of historical observations. Previously, at such levels, real compound annual changes in the S&P 500 have averaged negative 1.4% over the next 10 years. At the other extreme, the change has been a positive 6.4% when P/E ratios were in the cheapest tenth of observations.

Until recently, critics complained that the 10-year sweep of the Shiller P/E covered two market washouts, early and late last decade, which was unusual. That argument has expired now. But some still insist write-downs during the financial crisis skewed even a 10-year average P/E.

Furthermore, some Wall Street strategists argue that historically high profit margins at the moment are sustainable. Don't get complacent, though. Since profit margins also were inflated during the housing boom, the Shiller P/E actually might be understated.

WSJ: Crowd Hangs Over Oil Prices

         The Wall Street Journal reports,"the oil trade looks very crowded. The latest data from the U.S. Commodity Futures Trading Commission show that speculators held a net-long position—betting light, sweet crude oil prices would rise—of about 380 million barrels on the New York Mercantile Exchange as of March 18. That is close to the all-time peak reached earlier this month.

Bets on stronger U.S. oil prices rose through last year, but got an extra leg up as trouble flared in Ukraine. Yet this particular crisis looks, if anything, bearish for oil. It reinforces uneasiness over emerging markets, the center of growth in oil demand. And oil inventories aren't that low at second glance".

"In terms of days of demand covered by oil inventories, the industrialized world's current level is just one day less than the five-year average, according to Barclays. Moreover, the standoff with Russia gives the White House ample reason to release strategic stocks, which now cover more than 200 days of net oil imports from outside North America. In addition, oil supply from the Organization of the Petroleum Exporting Countries has been surprisingly strong recently, particularly from Iraq".

With so much money banking on oil prices rising, further signs of looser supply could cause a stampede out, pushing prices down sharply.

In contrast, while shale resources cap gas prices in the long term, the harsh winter has pushed seasonal inventories to a 10-year low even as the number of U.S. rigs drilling for gas has hit its lowest level since 1995, according to ISI Group.

Tempting drillers back will likely require gas futures for this year and next to rise. Yet, even though speculative length in gas contracts has risen of late, the net position overall remains short, indicating a prevailing view that prices will fall. Energy investors would do well not to follow the crowd.

WSJ: Latin American Stock Markets Poised for Recovery in 2014-Investors

                 The Wall Street Journal reports,"investors have high hopes for Latin American stocks in 2014".

Stock market indexes from Mexico to Chile fell enough over the course of 2013 to offer up plenty of bargains, and weaker currencies around the region add to the potential for smart stock picking.

"It's a good buying opportunity," said Geoffrey Dennis, head of global emerging-markets strategy at UBS. "People are saying 'It was a terrible year in 2013, it has to be better in 2014.'"

Foreign-exchange woes have piled on further misery. The region's currencies have been losing ground against the dollar for months, with the Brazilian real weakening 15.2% last year and the Peruvian sol weakening 9.7% partly because of investor concern about the looming end to the U.S. Federal Reserve's $85-billion-a-month bond-buying program.

Brazil's benchmark Ibovespa index lost almost 16% in 2013 and in dollar terms plummeted 26%. The index's most heavily weighted shares, iron miner Vale SA and oil company Petroleo Brasileiro SA,  lost the most market value in the year, according to Economatica. Vale lost $30 billion and Petrobras lost $34 billion.

Worst hit was Peru's IGBVL index, which dropped 23.6%, while Colombia's IGBC fell 11.2% and Chile's IPSA declined 14%. All three were even worse off in dollars. All stock index and currency figures were provided by FactSet.

Mexico's IPC  index fell 2.2% in 2013 and retreated 3.1% in dollar terms. 

While opinion is mixed about the potential for the region as a whole this year, investors see plenty they like in individual countries, though not always in the same countries.

The forward price/earnings ratio for Brazil's Ibovespa index was at 10.7 on Dec. 31, down from 19.2 a year earlier, according to FactSet. That compares with 15.4 for the S&P 500 on the last day of 2013.

In Mexico, Latin America's second-biggest economy after Brazil, the economy should bounce back in 2014, with an expansion of 3% after 2013's 1.2% growth rate, according to the IMF.

The growth slump last year may have been tied to Mexico's political cycle. Government spending rises ahead of a presidential election then declines rapidly afterward. Last year was no different with newly elected President Enrique Peña Nieto focusing on guiding reforms through Congress rather than on boosting short-term growth.

The biggest reform of all, the opening up of the country's oil industry to outside investors after a seven-decade monopoly by Pemex, could start to pay off quickly.

The next tier of Latin American economies, Chile, Colombia and Peru, will all see faster economic growth in 2014 than Brazil and Mexico, according to the IMF's forecasts. None of the three offer the breadth of options available in Brazil and Mexico, but there may be opportunities for careful stock-pickers that can hang on to shares, said Sammy Simnegar, a portfolio manager at Fidelity Investments

Nikkei Futures Slip With Aussie Stocks as Crude Oil Falls

"Japanese index futures fell while Australian stocks followed U.S. equities lower amid signs of slowing factory output in the world’s largest economies. Crude oil dropped before a report on American supplies as silver extended declines and gold held near a one-month low.

Nikkei 225 Stock Average futures lost 0.7 percent to 14,300 in the Osaka pre-market as Australia’s S&P/ASX 200 Index slipped 0.5 percent, snapping a two-day advance. Standard & Poor’s 500 Index (SPX) futures rose 0.1 percent by 8:21 a.m. in Tokyo after the gauge fell 0.5 percent in the U.S. Crude in New York dropped 0.2 percent. Silver declined a second day with gold trading steady after yesterday’s 1.9 percent slide. Indian rupee forwards climbed after the currency reached a two-week high".

"The Markit Economics preliminary index of U.S. manufacturing dropped to 55.5 from March from 57.1 in February, the London-based company said today. Readings above 50 indicate expansion. While it was the second-highest reading since January 2013, the March index level trailed the 56.5 median of 19 economists’ estimates compiled by Bloomberg".

Signs of faltering factory output in the world’s two biggest economies come as U.S. policy makers reign in stimulus and as Chinese lawmakers pledge to maintain growth while curbing shadow banking and credit expansion. The MSCI All-Country World Index fell 0.3 percent to a one-week low after reaching a more-than six-year high earlier in the month.

"Futures on on South Korea’s Kospi Index (KOSPI) fell 0.2 percent in most recent trading, while Hang Seng Index contracts declined 0.5 percent. Futures on the Hang Seng China Enterprises Index of mainland Chinese stocks listed in Hong Kong retreated 0.7 percent. The Bloomberg China-US Equity Index of the most-traded Chinese shares in New York gained 0.6 percent.

The MSCI Asia Pacific Index advanced 1.2 percent yesterday as the surprise drop in the HSBC Holdings Plc/ Markit Economics China manufacturing purchasing managers’ index ignited speculation the government will take steps to support economic growth. A gauge of emerging-market stocks added 1 percent in a second day of gains.

The yen was little changed for a fourth day, gaining less than 0.1 percent to 102.22 per dollar and holding steady at 141.44 per euro. The Australian dollar was little changed at 91.31 U.S. cents following yesterday’s climb of as much as 0.8 percent to the highest intraday level since December".

Source:  Bloomberg

WSJ: Goldman: Stock-Market Worries About Higher Rates ‘Overstated’

"Goldman Sachs U.S. stocks strategist is brushing off the talk of a more hawkish tone from Federal Reserve Chairwoman Janet Yellen.

The possibility of earlier-than-expected interest rate hikes was a surprise, said chief U.S. equity strategist David Kostin, but last week’s Fed statement didn’t “meaningfully change our positive medium-term outlook for the S&P 500.” The bank’s year-end target for the S&P 500 remains at 1900, which is 2.4% above where it was recently trading Monday.

And “concerns may be overstated as our economics team believes the first hike will not occur until early 2016, although the risks have shifted toward an earlier hike,” he said. He noted that while Treasury yields jumped on the news, the 10-year note’s yield was has been trading in a range between 2.8% and 2.6% since February, and remains well below its highs from late December.

Even though the possibility of higher interest rates could take a bite out of U.S. stock valuations in the short term, “investors don’t seem concerned with this either,” he said, noting that while the S&P 500 closed down 0.6% on Wednesday after the Fed statement and press conference, it rose 0.6% the following session.

Still, he recommends that investors look for stocks that benefit from rising bond market yields against a backdrop where he expects the yield on the 10-year U.S. Treasury to reach 3.25% by the end of this year".

Mr. Kostin sees one extra risk for stocks that is attracting less investor focus:

“Investors are focused on the near-term implications of interest rate hikes, but they should also be mindful of the long-term implications of a pick-up in wage growth, which should negatively affect margins.”

European Stocks fell , China's WEAK HSBC PMI and Preliminary report from Markit Germany unexpectedly slowed in March

U.S. stocks drift lower after weak PMI

U.S. stocks continued the previous session’s downward drift on Monday after Markit’s initial purchasing managers index for March fell slightly.
The initial or “flash” Markit PMI for the U.S. fell to 55.5 in March from 57.1 in February, but still showed improving conditions for manufacturers. Readings over 50 in the purchasing managers index indicate growth.

Source:  Marketwatch

New vacuum elevator installs in a few hours at a budget price

One of the major problems with installing an elevator in a home is the amount of space required, not to mention the costly infrastructure and maintenance issues and the immense problems and cost associated with any retrofitting. Now a new type of elevator developed in Argentina looks set to revolutionise the residential lift market, making elevators affordable to everyone. The self-supporting vacuum elevator is constructed of aluminium and polycarbonate and takes just a few hours to install. Unlike previous elevators, the new lift is completely self-supporting, extremely light, has a footprint of just one square metr e and requires no excavating pit or hoistway, it can be fitted to almost any two or three storey building at a fraction of the cost of a normal elevator.

The Residential Pneumatic Vacuum Elevator may be a little challenging to look at the first time you see it – the hoistway is transparent and there are clearly no cables supporting the elevator cab, so it looks distinctly like some thing out of Star Trek, operating on some advanced levitation principle.

It’s actually very safe with over 300 lifts already installed and working perfectly and works entirely according to the simplest laws of physics - the difference in air pressure above and beneath the vacuum elevator cab safely raise and lower it on a cushion of air and though there’s not much room inside, the lift is rated to a capacity of 450 pounds.

Though it might look precarious, it is absolutely safe even in the case of an electricity power failure as the descending car automatically stops and locks on the next floor.

Some clever locking mechanisms mean that the lift always stops exactly at floor level and as air pressure rather than mechanical apparatus move the lift, the starting and stopping is very smooth.

What’s more, the unique installation and streamlined design will adapt to many non-conventional living spaces in a variety house styles.

Source: Gizmag