E Cassandra Is Silent

Another day of seemingly irrepressible stock gains despite the risks of a holiday weekend, with US markets to close Monday for President’s Day. It doesn’t pay to predict trouble. But please do note that the almighty dollar is down again against foreign currencies.

In early trading US Treasuries again fell in price over housing starts rising, a possible herald of inflation. Lower T-Bill prices mean interest rates (which move inverse to the price) rose again. But now the bond market has moved the other way, and the yield spike dropped.

Friday, the lockstep move of bond and stock price broke down and stock prices rose solo. So maybe the stock selloff earlier this month is over. Or not. I don’t want to suffer the curse of Cassandra whose warnings were always correct, but were never believed. Gold is again on the uptrend because it moves inversely to the US$ in which it is priced. My paid subscribers were told when I bought more gold.

More for paid subscribers follows with a company result from Germany and news from Belgium, Canada, Russia, Hong Kong, Israel, India, South Africa, Switzerland, China, Brazil and Colombia. There will be no blog Monday because of President’s Day.

Allianz SE, the German insurer which owns most of the stock in Pimco, the US bond fund manager, benefited from the Pimco profits having recuperated the whole of what they lost after the walk-out of the bond king, Bill Gross. It continues to write lots of profitable life insurance policies. However for both Q4 and the full year, AZSEY suffered because of property & casualty insurance claim buildup because of disasters like hurricanes, earthquakes, floods in Europe, and fires in the US. Plus a sinking dollar.

Its operating profits for the year came in at 11.1 billion euros, marginally ahead of analyst consensus forecasts of euros 11.04 billion, down 2.3% y/y.

Operating profits at euros 6.8 billion for the quarter missed. Its Q4 profits missed because of the one-time impact of the US tax reform, and a weak dollar, as well as the P&C claims. Its net Q4 profit was euros 1.43 billion vs consensus forecasts (Reuters average) of 1.587 billion. This works out to $1.79 billion) but this was also because of the taxes over sale of Oldeburgishce Landesbank.

It expects current year at euros 10.6-11.6 billion, not a big change, according to CEO Oliver Baete. But it expects EPS to rise 11% to euros 16./share. It is confident that it can grow EPS 5% and fund buybacks from cost savings and a rise in its profit share from recently acquired Euler Hermes.

Pimco contributed euros 546 million in Q4, the highest level since the 2014 Q3 when Gross walked out and we bought AZSEY. Gross-lovers dropped Pimco from their holdings but over the past six quarters more investors have been buying because of the Pimco expertise and the need for smart strategies to earn interest in a low-yield market. Allianz asset management operating profits (which also include other fund managers) grew 8% in Q4, to euros 697 million and in the full year rose 11% to euros 2.44 million.