Archive for 2011

  • The Market Is Down on News from…Slovakia?
    , October 11th, 2011 at 9:38 am

    The stock market looks to open lower this morning. Once again, investors are looking at events in Europe. Each country needs to approve a deal to increase the size of the European bailout fund. The only country left is Slovakia. I can’t remember the last time investors in the U.S. were concerned about events in Slovakia, but here we are.

    After today’s close, Alcoa ($AA) will be the first major company to report earnings. Wall Street expects 22 cents per share compared with nine cents one year ago.

    Interestingly, while many large “capital markets” banks are feeling the squeeze, many retails banks are doing quite well. Goldman Sachs ($GS) may report a quarterly loss in a few days, but banks like Wells Fargo ($WFC) are thriving. Every stock in the KBW Bank Index ($BKX) is down for the year.

    On Thursday, JPMorgan Chase ($JPM) will report its third-quarter earnings. Here are some interesting comments from Bloomberg:

    The split between Wall Street businesses and other types of banking will be demonstrated by JPMorgan, the second-biggest U.S. bank by assets. The New York-based company will report 95 cents of earnings per share for the quarter, just 6 percent lower than a year earlier, according to the average estimate of 30 analysts surveyed by Bloomberg.

    Those earnings, the lowest in six quarters, may reflect gains in consumer lending and credit-card revenue as well as declines at the investment bank. James Staley, 54, who runs the investment bank, said at an investor presentation on Sept. 13 that “markets revenue” will decline about 30 percent from the second quarter and that fees from investment banking will be about $1 billion.

  • Morning News: October 11, 2011
    , October 11th, 2011 at 5:48 am

    Slovak PM: EFSF Vote To Be Linked To Confidence Vote

    Euro Declines From Three-Week High Versus Dollar Before Slovakia EFSF Vote

    Trichet Sees ‘Systemic’ Danger as Greek Writedowns Divide EU

    Bank Indonesia Surprises With Rate Cut

    Chinese Banks Rally After Huijin Begins Increasing Holdings

    Japan Courts the Money in Reactors

    Currency Forecasters Say Best Over for Dollar

    Regulators to Set Forth Volcker Rule

    Netflix, in Reversal, Will Keep Its Services Together

    Advisory Firm Urges Ouster Of Murdoch and His Sons

    Goldman Sachs Earnings Collapse, Wells Fargo Thrives

    Wal-Mart China Staff Detained in Probe

    Paulson Clients Said to Pull Less Than 10% From Two Hedge Funds

    Groupon: ‘Transparent About Our Lack of Transparency’

    Cullen Roche: The 5 Most Likely EMU Scenarios

    James Altucher: How to Use Gratitude to Get Rich

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  • IBM Hits New All-Time High
    , October 10th, 2011 at 3:32 pm

    Shares of IBM ($IBM) broke out to a high of $186.37 today which is a new all-time high. In the summer of 1993, the stock reached a split-adjusted low of $10.25. That’s a growth of 18-fold in 18 years. Annualized, that’s close to 18%.

    Below is a 50-year look at the stock. I Don’t think IBM gets the props it deserves.

    IBM was the glamor stock of the go-go 1960s. Due to its rapid growth and relatively few splits, the nominal share price was often over $500.

    IBM was removed from the Dow in 1939 and put back in 1979. In those 40 years, the stock gained an astounding 22,000%. If IBM had been in the index, the Dow would have broken 1,000 in 1961 instead of 1972. By my rough estimate, the index would be over 4,000 points higher today.

    IBM reached an out-performance peak in January 1970. For the next 16 years, IBM was mostly a market performer, perhaps slightly below average. Then the bottom fell out and IBM was a sell until September 1993. Since then, the stock has been a top performer.

  • The S&P 500 Breaks Above Its 50-DMA
    , October 10th, 2011 at 10:54 am

    For the first time since July 28th, the S&P 500 broke above its 50-day moving average.

  • The S&P 500 Breaks 1,190
    , October 10th, 2011 at 10:48 am

    The stock market is getting another bump this morning. The S&P 500 has been as high as 1,190.15 so far which is an 8.27% rally from last Monday’s close.

    The cyclicals are in charge today as the Energy, Financial and Materials sectors are doing the best. On Thursday of this week, JPMorgan Chase ($JPM) will be the first of the major banks to report earnings. The shares got as low as $27.85 last week. Today it’s the top-performing stock on our Buy List. This earnings report will probably tell us a lot about where banks earnings stand for this earnings season. I’m pleased to see that both AFLAC ($AFL) and Ford ($F) are strong today.

    Bloomberg sums up the good news:

    German Chancellor Angela Merkel and French President Nicolas Sarkozy said yesterday they will deliver a plan to recapitalize European banks and address the Greek debt crisis by the Nov. 3 Group of 20 summit. Belgium said today it will buy part of Dexia SA and provide security for depositors as part of a plan to rescue the lender.

  • Happy Sixth Birthday to Abnormal Returns!
    , October 10th, 2011 at 10:39 am

    Today marks the sixth birthday for the great blog, Abnormal Returns, which is the home of the indefatigable Tadas Viskanta.

    If you’re not familiar with Abnormal Returns, Tadas does a daily linkfest — though I’m hesitant to use that word since what he does is so much more — he captures the best of the financial blogosphere.

    The entire staff here at Crossing Wall Street congratulate Tadas on his success. Josh Brown at the Reformed Broker gathered a collection of praise from all across the world of financial blogs.

    Here’s a sample:

    Howard Lindzon (StockTwits): “Tadas has style. He loves curating and sharing and understands the link economy and the social web. We are lucky to have him in the financial blogosphere.”

    Mebane Faber (World Beta): “Tadas is a must read at our shop, and I’d pay more to subscribe to his site than to any newspaper.”

    JC Parets (All Star Charts): “It’s the best stuff out there. Plain and simple. If you want to know what’s going on – look no further. I tell this to everyone.”

    Eli Radke (Trader Habits): “Abnormal Returns has impacted me and countless others, that impact is measured by the inability to remember what life was like before. Meeting Tadas will only make you a bigger fan.”

    Felix Salmon (Reuters): “Abnormal Returns ROCKS. Happy blog-birthday, Tadas!”

    Justin Paterno (ZeroBeta): “Abnormal Returns is the motivating force of the financial blogosphere. If you write a blog post, you can’t wait to see if Tadas picks you up – not for the traffic but to see if what you wrote was worth linking to.”

    Mark Gongloff (WSJ MarketBeat): “Abnormal Returns is so important to my daily blogging life that I named my first child “Abbie Normal.” My wife of course had other ideas, but I told her ‘Ritholtz’ was a terrible name for a baby girl.”

    Joe Weisenthal (Business Insider): AR is awesome. In many ways, I consider Tadas a blog soulmate, as he started AR right around the same time I started my first financial blog, TheStalwart.com. Before anyone else he sensed that this financial blogging thing would be big, and since then that sense has served him identify and aggregate exactly what needs to be read right at any given time.

    TED (The Epicurean Dealmaker): “Abnormal Returns is an essential component of my toolkit for rapine, pillage, and world domination. Without Tadas, I’m sure I would be a hemp-wearing, dreadlocked slacker getting pepper-sprayed on Broad Street.”

  • Morning News: October 10, 2011
    , October 10th, 2011 at 7:36 am

    U.S. Stock Futures Climb After Merkel Pledges Support for Banks

    Trichet Throws Away Script, Reminds U.S. Euro Built to Last

    As Its Economy Sprints Ahead, China’s People Are Left Behind

    Erste Becomes First Foreign Bank to ‘Ring-Fence’ Hungarian Unit

    Crude Oil Highest Since Sept As Sentiment Improves

    Food Prices to Remain High, Price Swings to Continue, FAO Says

    Banks Brace for Fallout on Earnings

    Recession Officially Over, U.S. Incomes Kept Falling

    Jobs’s Death Turns Eyes on Apple’s $76 Billion Cash

    Sinopec to Buy Canada’s Daylight Energy for $2.1 Billion

    Belgium’s KBC Sells Private Bank to Qataris for $1.4 Billion

    Dexia CEO: Plan Doesn’t Need Approval From Shareholders

    Authorities Shut Wal-Mart Stores in Southwestern China

    Cohan: Occupy Wall Street Needs Goals, Or Funnel Cake

    Joshua Brown: Year of the Draggin’

    Phil Pearlman: “Revolutions Are Infinite”: The Activist Threshold Revisited and Occupy Wall Street

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  • NFP +103,000
    , October 7th, 2011 at 9:41 am

    The economy created 103,000 jobs in September. The unemployment rate remains at 9.1%.

    The good news is that the economy added 137,000 private sector jobs. Also, the number (private and non-private) for August was revised higher from zero to 57,000 jobs. The July number was revised higher from 85,000 to 127,000.

  • CWS Market Review – October 7, 2011
    , October 7th, 2011 at 9:27 am

    On Monday, the S&P 500 finally broke out of its 100-point trading range. For 41 sessions in a row, the index had closed between 1,119 and 1,219. But on Monday, the S&P 500 dropped down to close at 1,099.23. That was our first close below 1,100 in over a year.

    Since then, the market has raced higher. On Thursday, the S&P 500 closed at 1,167.97 which is a 5.98% surge in just three days. Naturally, we shouldn’t get too excited by this recent uptick. For the last several weeks, the stock market has bounced up and down in high-volatility spikes, but ultimately, we haven’t moved very far. However, with earnings season upon us, this time could be different.

    As usual, the hurdle has been Europe, and more specifically, Greece. For a few months now, investors have been jerked around as we wait to hear something (anything!) promising from the Old World. Unfortunately, European officials seem firmly committed to doing a series of half-steps—and after each one, they seem puzzled that things aren’t getting any better. The good news is that it appears as if some folks in Europe are starting to understand what needs to be done.

    In this issue of CWS Market Review, I want to give you a preview of the third-quarter earnings season. While the overall market continues to spin its wheels, I think several of our Buy List stocks are poised to surge higher. In fact a few of our stocks, like Deluxe ($DLX) and Ford ($F), have already started to turn the corner.

    I’m writing you in the wee hours of Friday morning. Later today, we’ll get the crucial jobs report for September. Wall Street has been dreading this report for several days now, and it’s easy to understand why. Frankly, nearly every jobs report for the last few years has been dismal. I’m afraid I’m not expecting much better for September’s report. Wall Street is expecting a gain of 60,000 nonfarm payroll jobs, and as low as that estimate is, it might be too high.

    If the news is better than expected, it may take some of the pressure off the Federal Reserve to get the economy going again. But bear in mind that the economy needs to create, on average, 200,000 net new jobs every month for a few years to get back to anywhere near normal. Truthfully, I think many of our economic problems are beyond the scope of the Fed’s repair kit, but I’ll save that for another time. If Friday’s jobs report is worse than expected, well…we’re already down so much that it may not hurt equities (although the political fallout could be dramatic).

    The truth is that the U.S. economy isn’t doing nearly as badly as is generally perceived. Of course, I’m not saying that the economy is humming along. I’m just saying that its performance is far better than the febrile commentary I see every day. Consider that earlier this week Bespoke Investment Group noted that 17 of the last 21 economic reports have come in better than expected. Just this week, the ISM Manufacturing index topped expectations. The ADP jobs report beat consensus and the construction spending report was surprisingly strong. On October 27th, the government will release its first estimate of Q3 GDP growth and I think it’s possible that growth will come in over 2%. That’s not great, but it’s a far cry from a Double Dip.

    Another promising note is that bond yields are finally beginning to creep higher. This is an early signal that investors may be willing to take on more risk. What’s interesting is how orderly the increase in risk is turning out to be. Yields for the one-, two- and three-year Treasuries all bottomed out on September 19th. Three days later, the yields for the five-, seven-, ten-, twenty- and thirty-year Treasuries hit their lows. Since then, the yield on the ten-year note has jumped 29 basis points. The five-year yield just closed above 1% for the first time in six weeks. The takeaway is that this orderly exodus out of low-risk investments may provide fuel for a sustained stock rally. Capital always goes where it’s treated best. If Friday’s jobs report comes in strong, Treasuries will continue to fall.

    I’m pleased to see that many of our Buy List stocks continue to do well. In the last two weeks, the Buy List has gained 2.11% while the S&P 500 is down by 0.15%. On Thursday, shares of AFLAC ($AFL) got as high as $38.40. That’s the highest price since mid-August and it’s a 22% bounce off the low from two weeks ago. I’ve been flabbergasted by AFLAC’s recent plunge. The company is clearly doing well. I expect to see another strong earnings report on October 26th. I also wouldn’t be surprised to see another upward revision to next year’s earnings guidance. Still, investors seem convinced that AFLAC is taking a bath on its European investments. They’re not. AFLAC is well protected. The stock is a very good buy up to $40 per share.

    Another big gainer recently has been JPMorgan Chase ($JPM). Over the last three days, the shares have gapped up by 14%. Next Thursday, JPM is due to report its third-quarter earnings. This will be the first of our stocks to report this season. Due to the problems in Europe and in our economy, Wall Street has been ratcheting down estimates for JPM. The Street currently expects JPM to report 98 cents per share which is 23 cents less than what they were expecting just one month ago.

    I have to admit that I don’t have a good feel for what JPM should report next week. In previous quarters, I had a pretty good idea but there are too many unknowns to give you a precise forecast. However, I wouldn’t be surprised to see JPM miss estimates this time around; but I’ll be far more interested to hear what they have to say about their business. JPM continues to be the healthiest of the major banks. Thanks to the lower share price, the stock currently yields 3.2%. I also expect that the bank will bump up that dividend early next year. In fact, they could easily raise the dividend by 30% to 50%. If next week’s earnings report is positive, JPM would be a good buy up to $34 per share.

    I’ve been very frustrated by the performance of Ford ($F) but I have to admit that the stock is well below a reasonable valuation for the company. Ford has turned itself around very impressively. I don’t like many cyclical stocks but Ford looks very good here. Sales continue to do well. The shares are currently going for about one-third of its sales. If you’re able to get shares of Ford below $11, you’ve gotten a very good deal.

    There are a few other stocks I want to highlight. Over the last three sessions, shares of Deluxe ($DLX) are up nearly 18%. Even after that rally, the shares still yield 4.7%. Jos. A Bank Clothiers ($JOSB) is up over 10% since Monday and Wright Express ($WXS) has tacked on 13%. Last week, I highlighted Moog ($MOG-A), one of our quieter buys, and the stock has rallied nicely since then.

    That’s all for now. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

    – Eddy

  • Morning News: October 7, 2011
    , October 7th, 2011 at 5:25 am

    Merkel-Sarkozy Divided on Default Threat to Banks

    German Minister Signs MOU To Help Greece Restructure Its Economy

    Bank of Japan Keeps Policy Unchanged as It Watches Yen Moves, Europe

    Australia Has Scope to Cut Rates If Needed, IMF Staff Say

    Bank of England Loses Faith in Europe, Announces Stimulus

    U.S. Senate Nears Approval of Measure to Punish China Over Currency Manipulation

    Brent Crude Stays Firm Above $105 on EU’s Move

    Some Unemployed Find Fault in Extension of Jobless Benefits

    F.C.C. Plans to Overhaul Telecom Fund to Focus on Expanding Broadband

    Retailers’ Discounts Lure Shoppers

    Moody’s Cuts RBS and Lloyds Ratings

    S&P Cuts Core Dexia Banks By One Notch, On Watch

    Oracle Settles U.S. Agency Overbilling Case for $199.5 Million

    Moving On, Minus Its Genius

    Jeffrey Carter: Steve Jobs and the Entrepreneurial Ecosystem

    Credit Writedowns: Europe’s Bank Problem

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