Archive for 2011

• CWS Buy List +4.15% Today
  Eddy Elfenbein, October 4th, 2011 at 11:17 pm

  Since March 17, 1998, the S&P 500 has gained 4.02% (excluding dividends). That entire gain came during the last 45 minutes of trading today.

  Our Buy List did extremely well. Our 20-stock portfolio gained 4.15% today which was 190 basis points better than the S&P 500. That’s the single-biggest out-performance spread in two-and-a-half years.

  Here’s a look at how our 20 stocks fared:

  Symbol	Gain
  NICK	14.99%
  DLX	11.52%
  WXS	8.61%
  AFL	7.63%
  F	7.58%
  JPM	6.55%
  JOSB	6.41%
  MOG-A	6.38%
  LUK	5.28%
  FISV	4.60%
  SYK	3.13%
  ORCL	2.68%
  BDX	2.12%
  RAI	1.28%
  MDT	1.10%
  ABT	0.70%
  BBBY	0.34%
  GILD	0.19%
  JNJ	0.14%
  SYY	-0.82%

• Rough Patch of the Election Cycle
  Eddy Elfenbein, October 4th, 2011 at 3:09 pm

  We’re currently in an historic rough patch of the presidential election cycle. From September 6th of the pre-election year until May 28th of the election year, the Dow has lost an average of 5.2%.

  

  Historically, the Dow has gained an average of 24.1% from September 30th of the mid-term election year to September 6th of the pre-election year. This means that nearly two-thirds of the Dow’s four-year gain (24.1% of 36.7%) comes in less than one-quarter of the time. That’s a pretty stunning stat.

  After September 6th of the pre-election year till May 29th of the election year, the Dow has historically pulled back 5.2%. After that, it puts on a nice 23.2% climb to August 3rd of the post-election year. Then trouble starts. After August 3rd, the Dow pulls back 5.6% and we’re back at our starting point, September 30th of the mid-term election year.

• Small-Caps Strike Back
  Eddy Elfenbein, October 4th, 2011 at 2:41 pm

  Yesterday I wrote about the huge divergence between large-caps and small-caps. The Russell 2000 ($RUT) plunged 5.38% while the S&P 500 lost a measly 2.85%. That’s a big spread for one day.

  Today, the small-caps are getting their revenge.

  

• Bernanke Warns
  Eddy Elfenbein, October 4th, 2011 at 1:04 pm

  

  Bernanke warns Congress not to cut too much now

  Bernanke warns Congress against deep budget cuts in weak economy

  Bernanke Warns Congress: More Sluggish Job Growth Ahead

  Bernanke Warns US Congress Against Cutting Too Much Too Soon

  Bernanke Warns Spending Cuts Could Derail Recovery

  
  Bernanke Warns US Unemployment is a ‘National Crisis’

  Bernanke Warns America of Risks to Economy

  Bernanke Warns Jobs Recovery Could Take Years, Urges Action on Deficit Problems

  Bernanke Warns GOP Not To Play Politics With Debt Ceiling

  Bernanke Warns Markets Threaten Weak U.S. Economy

  Bernanke Warns That Regulators Must Avoid Burdensome Rules When Enacting Financial Reform

  Bernanke warns: US Deficit ‘Not Sustainable’

  Bernanke Warns of Inflation Risks

  Stocks Fall as Bernanke Warns About Oil Prices

  Bernanke Warns of Catastrophe if Debt Limit Not Raised

  Bernanke Warns Against Steep U.S. Budget Cuts

  
  Bernanke Warns on Debt-Limit ‘Chaos’

  Ben Bernanke warns US of risks from weak house prices and ailing banks

  Bernanke Warns of High Budget Deficits

  Bernanke Warns of Devastating Economic Collapse

  Bernanke Warns of Threat from Deficit

  Ben Bernanke Warns of Looming Economic Crisis

  Fed Chairman Ben Bernanke Warns Against Hasty Action on the US Deficit

  Bernanke Warns U.S. of ‘Unsustainable’ Debt Level

  Federal Reserve Chairman Ben Bernanke Warns Congress that the Federal Reserve Will Not “Print Money” to Pay for the Exploding U.S. National Debt

  Bernanke Warns About Creating New Bubbles

  
  Bernanke Warns Against Narrowing Fed Focus

  
  Bernanke Warns of Small-Bank Risks

  Bernanke Warns Economic Outlook ‘Uncertain’

  Bernanke Warns of Tax Hikes or Benefit Cuts to Deal With Deficit

  Bernanke Warns of Need for Monetary Tightening

  Bernanke Warns Mortgage Rates Could Rise on Debt Worries

  Ben Bernanke Warns Hedge Fund Billionaires

  Greenspan Home Robbed

• Bouncing Around Is What Markets Do
  Eddy Elfenbein, October 4th, 2011 at 12:49 pm

  Chao Deng in the Columbia Journalism Review:

  “The idea that all of a sudden people got the idea that Bernanke was going to do something, to me, is just kind of crazy,” Miller said later when I reached him on the phone. “There is too much meaning inferred from what is normal volatility or variation.”

  A better explanation for the Tuesday rally was that the huge stock sell-off in early August had set up markets for a relief bounce. After seeing a bit of upside, some investors got antsy enough to want to jump back into equities. And when stocks ran up so sharply at midweek, some decided to take profits, as the saying goes, and get out.

  In the end, bouncing around is just what markets do, isn’t it? That’s why I don’t blame sources when they decline to talk about intraday movements. I’ve encountered a handful of long-term portfolio managers who scoff at the very idea of reporting on daily market movements. The strategists who do talk do the best they can. Sometimes, if no macro explanation presents itself, they resort to talking about individual stocks or sectors.

  100% correct.

• Keynes on the Gold Standard
  Eddy Elfenbein, October 4th, 2011 at 11:03 am

  (via Matt Yglesias)

• Bernanke Speaks!
  Eddy Elfenbein, October 4th, 2011 at 10:21 am

  Welcome to a bear market! The S&P 500 is now over 20% below its April high.

  Big Ben is speaking before Congress today. Here’s a sample:

  To be sure, fiscal policymakers face a complex situation. I would submit that, in setting tax and spending policies for now and the future, policymakers should consider at least four key objectives. One crucial objective is to achieve long-run fiscal sustainability. The federal budget is clearly not on a sustainable path at present. The Joint Select Committee on Deficit Reduction, formed as part of the Budget Control Act, is charged with achieving $1.5 trillion in additional deficit reduction over the next 10 years on top of the spending caps enacted this summer. Accomplishing that goal would be a substantial step; however, more will be needed to achieve fiscal sustainability.

  A second important objective is to avoid fiscal actions that could impede the ongoing economic recovery. These first two objectives are certainly not incompatible, as putting in place a credible plan for reducing future deficits over the longer term does not preclude attending to the implications of fiscal choices for the recovery in the near term. Third, fiscal policy should aim to promote long-term growth and economic opportunity. As a nation, we need to think carefully about how federal spending priorities and the design of the tax code affect the productivity and vitality of our economy in the longer term. Fourth, there is evident need to improve the process for making long-term budget decisions, to create greater predictability and clarity, while avoiding disruptions to the financial markets and the economy. In sum, the nation faces difficult and fundamental fiscal choices, which cannot be safely or responsibly postponed.

• Morning News: October 4, 2011
  Eddy Elfenbein, October 4th, 2011 at 5:37 am

  EU Signals Bigger Losses for Bondholders on Greek Bailout

  Belgium, France May Act To Help Stricken Dexia

  Macau Gambling Revenue Rises 39% in September

  Gold Hits 1-Week High On Greece Deficit Miss

  Crude Oil Declines to Eight-Week Low on U.S. Supplies, Libyan Production

  Market Nears Bear Territory

  Protests Against Wall Street Spread Across U.S.

  U.S. Senate Backs Tough China Trade Moves

  U.S. Vehicle Sales Soared Nearly 10% in September, Despite Economic Gloom

  Toyota, Honda Lose Market Share in September U.S. Sales Rebound

  BMW Rides X3 to U.S. Luxury Sales Lead

  UBS Sees ‘Modest’ Profit After Trading Loss

  Before Latest Phone Debut, Apple Has Harsher Competition

  American Airlines Resumes Pilot Talks as Stock Rout Shows Bankruptcy Concern

  Joshua Brown: In Case You Haven’t Noticed, the Protesters are Winning

  Phil Pearlman: Dark Songs For A Stock Market Crash via @Dinosaurtrader

  Be sure to follow me on Twitter.

• Surveying the Damage
  Eddy Elfenbein, October 3rd, 2011 at 10:50 pm

  Ugh! Monday was a rotten day for the stock market. Let’s survey some of the damage.

  The S&P 500 plunged 32.19 points or 2.85% to close at 1,099.23 which is the lowest close in 13 months. The index now has its lowest trailing Price/Earnings Ratio in over 22 years. The S&P 500 is trading at just 11.69 times earnings which it hasn’t done since March 30, 1989.

  As bad as today was for the S&P 500, the small-cap stocks did much worse. The Russell 2000 ($RUT) plunged 5.38% and the S&P Small-Cap 600 ($SML) lost 5.06%. The large-cap S&P 100 ($OEX) lost “only” 2.59% while the Dow dropped 2.36%.

  Smaller stocks tend to be more cyclically focused. The Morgan Stanley Cyclical Index ($CYC) lost 3.6% to close at 737.63. That’s the CYC’s lowest close since November 4, 2009.

  Looking at the S&P sectors, the financials were once again the biggest losers. The Financial Index dropped 4.53%. The Financial Sector ETF ($XLF) is down to $11.28.

  Several major banks are now selling at distressed valuations. Shares of Bank of America ($BAC) plunged through the $6 barrier to close at $5.53. The stock has been chopped in half in just three months. Shares of BAC are about where they were in December 1985.

  During the financial crisis, BAC cut its dividend from 32 cents per share to one penny per share, just to say that they’re still paying a dividend. Well at four cents per year, that yield comes to 0.72% which isn’t far from a five-year Treasury yield of 0.88%.

  We’re now seeing many major financial firms with yields north of 3.5%. AFLAC ($AFL), an S&P Dividend Aristocrat, now yields 3.57%.

  Once again, the big worry today was Europe. Bloomberg noted that the cost to protect against default on European corporate debt nearly reached a three-year high today. The strange fact is that the recent economic data has been fairly positive. The folks at Bespoke Investment Group pointed out that 17 of the last 21 economic reports have been better than expected. Of course, much of that data is past news.

  To give you an idea of how low the valuations are, if we assume that the market is going for 14 times next year’s earnings, that would mean that earnings would have to drop 20% next year. Earnings are currently expected to rise over 13% next year.

• S&P 500 = 1,099.23
  Eddy Elfenbein, October 3rd, 2011 at 4:06 pm

  The trading range has been broken. For the first time since September 8, 2010, the S&P 500 closed below 1,100.