Archive for November, 2011

  • Today’s Monster Day
    , November 30th, 2011 at 5:06 pm

    We had a spectacular rally today. By my numbers, this was the eighth-best day following an up day for the S&P 500 in the last 70 years. There have been other strong days, but they often came after big down days. Yesterday, we were up slightly.

    The Dow gained 490 points today which was its best day since March 2009. What impressed me was that we continued to rally into the close which means that investors aren’t so afraid to hold stocks overnight.

    While the S&P 500 gained 4.33%, which is about 470 billion in market cap, our Buy List trailed the market gaining 3.91%. The shortfall was due to Jos. A. Bank ($JOSB) which was our only losing stock today. Shares of JOSB dropped by 3.7% due to today’s warning although they had been much lower.

    Seven of our stocks were up more than 6%, three were up by more than 7% and JPMorgan Chase ($JPM) added 8.4% for the day. As I suspected this morning, today was a huge day for cyclical stocks. The Morgan Stanley Cyclical Index ($CYC) jumped 5.92% today to close at 900.46. The $VIX plunged 9.3% to 27.80.

  • Is Microsoft a Value Stock?
    , November 30th, 2011 at 2:44 pm

    Check out the plunge in Microsoft‘s ($MSFT) P/E Ratio:

    Even though Microsoft’s earnings have risen steadily, the stock has basically ranged between $25 and $30 for the last eight years. Add the two phenomena together and you get a declining Price/Earnings Ratio.

    So is the stock cheap? Maybe.

    For the fiscal year ending in June 2012, Microsoft is expected to earn $2.75 per share. The stock is currently going for 9.24 times that.

    Over those same four quarters, the S&P 500 is expected to earn $101.73. At the current price, the index is going for 11.17 times that. This means that Microsoft’s valuation is 17% less than the overall market’s.

    Also, bear in mind that Microsoft recently raised its quarterly dividend to 20 cents per share. That 80-cent dividend for the year works out to a yield of 3.15%.

  • Amazon Is Still Too Expensive
    , November 30th, 2011 at 11:16 am

    Amazon‘s ($AMZN) stock is down a lot since its October plunge. On October 25th, the shares dropped from $227.15 to $198.40 after missing its earnings by 10 cents per share. The stock is currently down to $191.

    So is it cheap now?

    Nope, not even close. Put it this way: Wall Street has cut its EPS estimate for next year from $3.80 four months ago to “only” $2.05 today.

    At the current price, that’s still more than 93 times earnings.

    Stay away from Amazon.

  • Still More Good News
    , November 30th, 2011 at 11:00 am

    We’re not done yet. The S&P 500 has been as high as 1,239.37 today. Every single Buy List stock, save for Joey Bank ($JOSB), is up today.

    The National Association of Realtors reported that pending home sales surged 10.4% last month. The expectation was for an increase of just 2%.

    The other good news is that the Chicago PMI just hit a seven-month high.

  • Jos. A. Bank Beats By Three Cents
    , November 30th, 2011 at 9:28 am

    Another great quarter from Jos. A. Bank Clothiers ($JOSB). The company just reported fiscal Q3 earnings of 54 cents per share which was three cents more than the Street was expecting.

    Revenues rose 20.9% to $209.6 million. That’s more than $14 million more than the consensus. Comparable store sales rose by an impressive 14.6%.

    JOSB has now grown earnings for 40 of the last 41 quarters including the last 22 in a row. The company also offered a warning about the start of the fourth quarter. Here’s what they had to say:

    JoS. A. Bank Clothiers, Inc. announces that net income for the third quarter of fiscal year 2011 increased 19.3% to $15.0 million as compared with net income of $12.6 million for the third quarter of fiscal year 2010. Earnings per share for the third quarter of fiscal year 2011 increased 20.0% to $0.54 per share as compared with earnings per share of $0.45 for the third quarter of fiscal year 2010. The third quarter of fiscal year 2011 ended October 29, 2011; the third quarter of fiscal year 2010 ended October 30, 2010.

    Total sales for the third quarter of fiscal year 2011 increased 21.0% to $209.6 million from $173.3 million in the third quarter of fiscal year 2010, while comparable store sales increased 14.6% and Direct Marketing sales increased 28.6%.

    Comparing the first nine months of fiscal year 2011 with the first nine months of fiscal year 2010, net income increased 18.9% to $53.3 million as compared to $44.9 million and earnings per share increased 18.6% to $1.91 per share as compared to $1.61 per share. Total sales for the first nine months of fiscal year 2011 increased 17.4% to $633.6 million from $539.8 million for the first nine months of fiscal year 2010, while comparable store sales increased 9.9% and Direct Marketing sales increased 26.1%.

    “We are pleased to report another solid sales and earnings performance for the third quarter of fiscal year 2011 with sales growth of 21.0% and earnings growth of 19.3%. With this quarter’s results, we have achieved earnings growth in 40 of the past 41 quarters when compared to the respective prior year periods, including 22 quarters in a row,” stated R. Neal Black, President and CEO of JoS. A. Bank Clothiers, Inc. “The fourth quarter, compared to a very strong performance last year, has started out more slowly than we had planned. November comparable store sales declined, while our direct segment sales increased, compared to the same period last year. As a result, we have adjusted our December merchandising and marketing plans for stores. We believe our efforts will be effective and appealing to our customers. Therefore we remain cautiously optimistic for the outcome of this year’s fourth quarter,” continued Mr. Black.

    Update: The shares are down today due to the warning mentioned above.

  • The Fed’s Statement on Today’s News
    , November 30th, 2011 at 9:12 am

    Here’s the statement from the Federal Reserve:

    The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.

    These central banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. This pricing will be applied to all operations conducted from December 5, 2011. The authorization of these swap arrangements has been extended to February 1, 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will continue to offer three-month tenders until further notice.

    As a contingency measure, these central banks have also agreed to establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant. At present, there is no need to offer liquidity in non-domestic currencies other than the U.S. dollar, but the central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise. These swap lines are authorized through February 1, 2013.

    Federal Reserve Actions
    The Federal Open Market Committee has authorized an extension of the existing temporary U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank through February 1, 2013. The rate on these swap arrangements has been reduced from the U.S. dollar OIS rate plus 100 basis points to the OIS rate plus 50 basis points. In addition, as a contingency measure, the Federal Open Market Committee has agreed to establish similar temporary swap arrangements with these five central banks to provide liquidity in any of their currencies if necessary. Further details on the revised arrangements will be available shortly.

    U.S. financial institutions currently do not face difficulty obtaining liquidity in short-term funding markets. However, were conditions to deteriorate, the Federal Reserve has a range of tools available to provide an effective liquidity backstop for such institutions and is prepared to use these tools as needed to support financial stability and to promote the extension of credit to U.S. households and businesses.

    Information on Related Actions Being Taken by Other Central Banks
    Information on the actions to be taken by other central banks is available on the following websites:

    Bank of Canada

    Bank of England

    Bank of Japan (PDF)

    European Central Bank

    Swiss National Bank (PDF)

    Frequently Asked Questions: U.S. Dollar and Foreign Currency Liquidity Swaps

  • ADP Says The Economy Added 206,000 Jobs Last Month
    , November 30th, 2011 at 9:07 am

    What’s also helping the pre-market optimism today is the news that according to ADP ($ADP), the U.S. economy created 206,000 jobs last month. Economists had been expecting a gain of 130,000.

    The ADP report comes out just two days before we get the official numbers from the government. I’m usually not a big fan of the ADP numbers but I have to admit that they got it close last time. For October, ADP said that there were 110,000 new jobs. Then the government said it was 104,000. Incidentally, ADP revised the October figure up to 130,000.

  • Stocks Poised to Boom Today
    , November 30th, 2011 at 8:52 am

    The futures markets currently indicate that stocks will rally big-time today on the news the Fed is teaming up with other central banks to “lower the pricing on the existing temporary liquidity swap arrangements by 50 basis points.” Also, Kourtney Kardashian is expecting again, though the first news piece is probably a lot more important. Skipping all the econo-speak, the idea is that the central banks will provide liquidity to Europe.

    My suspicion, again, is that this isn’t what’s wrong. The problem isn’t a lack of liquidity, though that’s nice to have. The problem is that there’s too much debt and that has to be wound down. That process is going to be long and painful. What the world central banks are doing is almost like pouring high-grade gasoline into a car that doesn’t have any wheels. Now they’re baffled that it doesn’t seem to be doing the trick.

    The immediate market reaction will be that all the “risk assets” will go much higher, and that’s what we’re going to see today. Expect big moves in gold and cyclicals.

    The other news is that China is lowering the reserve requirement for its banks. The mess in Europe has clearly been hurting China. For the third quarter, the Chinese economy plunged all the way down to a growth of, ready for this, 9.1%. Don’t laugh; that’s actually the slowest pace in two years.

    So the People’s Bank of China has said that it’s cutting the reserve ratio for banks their by 0.5%. Check out this chart which shows that Chinese exports to Europe have been “falling off a cliff.”

  • Morning News: November 30, 2011
    , November 30th, 2011 at 5:20 am

    Euro-Area Ministers Agree on Bond Guarantees, Seek Larger IMF Role

    Ratings Firms Misread Signs of Greek Woes

    Company Bond Sales Plunge as Trust in Banks Fades

    ECB’s Noyer: Policy Makers Need To Stabilize European Bond Market

    Danes Look to German Model After Housing Bubble

    Greece’s Piraeus Bank Posts Losses On Higher Provisions

    BOJ’s Nishimura Warns of Risk of Broad Credit Crunch

    A New Shot at Mortgage Relief

    S.&P. Cuts Its Ratings for 15 Banks

    Boeing’s Albaugh Expects Long-Term Benefits From AMR Bankruptcy Filing

    Ranbaxy Without Lipitor May Have to Rely on India Drug Sales

    Facebook May Be Forced to Go Public Amid Market Gloom

    At Diamond Foods, Accounting Weighs on Pringles Deal

    Empire State Building’s Controlling Owner Malkin May Go Public as a REIT

    Samsung Defeats Apple-Sought Ban in Australia

    Paul Kedrosky: Some Upbeat Microsoft News

    James Altucher: 5 Unusual Things I Learned from Isaac Asimov

    Be sure to follow me on Twitter.

  • From The Onion’s Stockwatch
    , November 29th, 2011 at 6:19 pm

    You never know.

    JPMorgan Chase (JPM)

    $34.90 (+$0.72) (+ 2.1%) The financial world was shaken today when CEO Jamie Dimon stated that the Occupy Wall Street movement had significantly eaten into the banking titan’s profits, announced Chase would have to drastically reformulate its business plan, and then paused a beat before saying, just kidding, they made a record $17.4 billion last year.