Archive for April, 2011

  • Stocks and Bonds Are Both Up Today
    , April 26th, 2011 at 2:11 pm

    Not only is today a good day for the stock market (the S&P 500 even got into Black Death territory of 1348-49), but the bond market is also doing well. This has been fairly rare recently to have both markets rally on the same day.

    Below I have a chart of the daily changes for the past year of the S&P 500 ETF ($SPY) on the X-axis and the Long Treasury Bond ETF ($TLT) on the Y-axis. As you can see, the returns have been negatively correlated.

    What does a re-convergence mean? It’s hard to say because both can be correlated on the up or down side. I should add that the TLT is the iShares Barclays 20+ Year Treas Bond ETF and that maturity hasn’t been the prime focus of the Federal Reserve’s QE2 policy.

    So what happens when paper assets are doing well on the same day? Hard assets like gold and silver are down.

  • Buy List Breaks 10% for the Year
    , April 26th, 2011 at 11:54 am

    It’s still early but our Buy List is doing very well today. Right now, we’re up 1.10% which gives us a gain of 10.64% for the year.

    Ford had been the big gainer today but it’s given some back. Fiserv ($FISV), Joey Banks ($JOSB) and Oracle ($ORCL) are all at new 52-week highs.

    I shouldn’t speak too loudly since we’re still in the middle of earnings season. I’m very curious what Becton, Dickinson ($BDX) will have to say after the close. I also think Deluxe ($DLX) is ready for a nice earnings beat on Thursday.

    Today’s report on consumer confidence beat expectations. The index rose to 65.4 which was 0.9 more than consensus. This is important because consumers make up about two-thirds of the economy.

  • Market Hits 34-Month High
    , April 26th, 2011 at 11:15 am

    Thanks to strong earnings from 3M ($MMM) and Ford ($F), the S&P 500 has broken out to a 34-month high today. The index has gotten as high as 1,345.97 this morning. This is the highest the S&P 500 has been since June 19, 2008.

  • Ford Earns 61 Cents Per Share
    , April 26th, 2011 at 8:31 am

    Excellent quarter for Ford ($F). The company made 61 cents per share which was 11 cents more than Wall Street’s consensus. This was Ford’s best profit in 13 years. The stock looks to open close to $16 per share this morning.

    Ford earned $2.6 billion in the first three months of 2011, a 22.4% improvement over a year earlier, as U.S. sales increased on the strength of small and midsize cars and cost-cutting in Europe resulted in a modest operating profit.

    The Dearborn automaker’s net income of 61 cents per share beat the 50 cents per share consensus forecast of about 20 Wall Street analysts and marked Ford’s most profitable first-quarter in 13 years. In 2010’s first quarter Ford made $2.1 billion, or 46 cents per share.

    Revenue increased 18% to $33.1 billion from $28.1 billion a year earlier.

    “Our team delivered a great quarter, with solid growth and improvements in all regions,” said Alan Mulally, Ford president and CEO. “We continue to accelerate our One Ford plan around the world.”

    Other good news is that the earthquake in Japan will have a very minor impact on Ford’s finances.

  • Morning News: April 26, 2011
    , April 26th, 2011 at 7:33 am

    Canadian Banks Aren’t Cracking China

    Greek 2010 Budget Deficit Revised Higher

    Most European Stocks Climb as UBS Surges; U.S. Futures Advance

    Dollar Falls on Speculation Fed May Keep Supporting Economy After QE Ends

    US Stock Futures Post Modest Gains Ahead Of Ford Earnings, FOMC

    Gold Dips; Silver Partly Recovers From Asia Swoon

    Oil Drops From 31-Month High as Saudi Arabia Signals Discomfort With Price

    ICE, Nasdaq: Explain Rival Deal’s New Synergies

    Biggest Banks Beating Estimates Can’t Hide 13% Drop in Revenue

    Smaller Cars Lift Ford’s Profit to $2.55 Billion

    UBS Attracts Highest Inflows Since 2007 as Profit Tops Estimates

    Netflix 1Q Net Soars But 2Q Outlook Disappoints

    Minmetals Drops Equinox Bid After Being Trumped by Barrick’s $7.68 Billion

    Aegon Sells Transamerica Re

    APPARENTLY QE2 IS “DISAPPOINTING”…

    Joe Weisenthal: What I Read

    Joshua Brown: Thirty Two New ETFs in Three Days

    Paul Kedrosky: How Gold Compares to Past Bubbles

  • Department of Awesome Ticker Symbols
    , April 25th, 2011 at 9:56 pm

    The new iPath Pure Beta Precious Metal ticker symbol = BLNG.

    (HT: StockJockey)

  • Shiller Vs. Seigel
    , April 25th, 2011 at 7:02 pm


    I find this discussion frustrating because I disagree with both parties on major points. Having said that, I think that Professor Seigel has the better argument.

    I’ve often criticized Professor Shiller’s attachment to the 10-year P/E Ratio, which he calls the Cyclically Adjusted P/E Ratio (or CAPE). The problem is that both stock prices and earnings are cyclical so it makes sense that their valuation metrics should be cyclical as well.

    The other problem with looking so far back into the past is that the CAPE begins to tell you less about current valuations and more about the past earnings trend. Professor Seigel makes this point and he’s correct: the elevated CAPE highlights how poor earnings have been since 2001. I don’t know how that portends a poor-performing stock market.

    The other issue is that many people don’t see what Professor Shiller is doing. He makes it clear that he’s not trying to predict market tops or bottoms. He’s trying to assess a very long-term market outlook. This is something he makes very clear yet he’s earned a reputation for making accurate market calls which he never has.

    If you followed CAPE you would have missed out on much of the greatest buying opportunity of the last 70 years. Shiller was bullish during part of the run but he turned cautious very early. In fact, Shiller is routinely credited for being accurate when he’s really being consistently cautious.

    Don’t get me wrong — I think Shiller’s goal of making long-term assessments of the market is important. But I’m far more concerned with the question of where the stock market (and individual stocks) should be priced right now.

    Personally, I think the yield curve does a better job than the P/E Ratio does.

    More: Megan McArdle takes Shiller’s side.

  • Supply of New Homes Is Lowest Since August 1967
    , April 25th, 2011 at 10:45 am

    Check out today’s housing report. The supply of homes on the market is at its lowest since since August 1967. Yet prices are still down from a year ago!

    The Commerce Department said on Monday sales rose 11.1 percent to a seasonally adjusted 300,000 unit annual rate, after an upwardly revised 270,000 unit pace in February.

    Economists polled by Reuters had forecast new home sales climbing to a 280,000-unit pace last month from a previously reported record low 250,000 unit rate.

    Compared to March last year sales were down 21.9 percent.

    The market for new homes is being squeezed by competition from previously owned homes and a deluge of foreclosed properties, even though inventories of new houses are at a 43-1/2 year low.

    A report last week showed there were 3.55 million previously owned homes on the market in March, well above the economy’s natural rate of between 2 million and 2.5 million.

    When foreclosed homes and those that are highly delinquent are taken into account, economists say supply is anywhere in the range of 8 million to 9 million.

    The median sales price for a new home rose 2.9 percent last month to $213,800 from February. Compared with March last year, the median price fell 4.9 percent.

  • Ford Earnings Preview
    , April 25th, 2011 at 8:33 am

    Three months ago, Ford reported terrible earnings. Part of the reason is that the company didn’t “manage” its expectations well. That’s why Wall Street felt so let-down. The next earnings report is due out tomorrow.

    Ford Motor Co. (F), the second-largest U.S. automaker, may report its largest first-quarter profit since 1998 tomorrow as fuel-efficient new models helped sales gain amid surging U.S. gasoline prices.

    Profit excluding some items may have climbed to 50 cents a share, according to the average of 14 analysts’ estimates, from 46 cents a year earlier. Net income may have risen to $2.1 billion, the average of three analysts’ estimates compiled by Bloomberg, and the most since a $17.6 billion profit in the first quarter of 1998.

    Chief Executive Officer Alan Mulally has worked to boost fuel economy, and sales of more efficient new models such as the Fiesta subcompact and Explorer sport-utility vehicle have risen as gas prices gained this year. Investors remain concerned that surging fuel costs may hurt consumer confidence and car sales, said Gary Bradshaw, a fund manager at Hodges Capital Management.

    “I don’t feel as good as I would if I was filling up at the pump for $2.89 instead of $3.89 a gallon,” said Bradshaw, whose Dallas-based firm owns about 200,000 Ford shares. “I still think Ford’s lineup will weather the storm. They’re better prepared this time.”

  • The Rise in Gasoline Prices
    , April 25th, 2011 at 8:01 am

    Here’s a look at the recent run-up in gasoline prices at the pump. This is an average from GasBuddy.com.

    In states with higher taxes and stricter standards, prices at the pump are even higher. Higher gas prices act like a regressive tax on American consumers, and that hinders economic growth.