Archive for December, 2012

• Cyclical Stocks Continue to Lead
  Eddy Elfenbein, December 13th, 2012 at 1:32 pm

  Every so often I like to look at how economically sensitive stocks are compared with the rest of the stock market. My preferred metric is dividing the Morgan Stanley Cyclical Stock Index ($CYC) by the S&P 500.

  Since August, this ratio has been racing higher. We’re close to taking out the recent high from November 7th which was the highest point of the last eight months.

  

• The S&P 500 Is Zero for 12 After Six-Day Win Streaks
  Eddy Elfenbein, December 13th, 2012 at 12:50 pm

  We had some good economic news this morning. The government reported that retail sales rose by 0.3% last month. This may indicate that the holiday season is going well. Also, new claims for unemployment insurance dropped by 29,000 to 343,000. That’s just 1,000 away from matching the lowest level in nearly five years.

  The S&P 500 has risen for the last six days in a row. We were in positive territory earlier today but we’re currently down thanks to some disappointing news regarding the Fiscal Cliff. The S&P 500 hasn’t had a seven-day winning streak in six years. Interestingly, the index has been 0 for 12 after its last 12 six-day win streaks.

  CA Technologies ($CA) gapped up at the open today on the news that Michael Gregoire will be the new CEO. The shares got as high as $22.31 but have since given back their gain.

  

• Morning News: December 13, 2012
  Eddy Elfenbein, December 13th, 2012 at 7:48 am

  Berlusconi Says Return Hinges on Incumbent

  SNB Maintains Ceiling as European Woes Weigh on Franc

  U.K. Government Lifts Ban on Shale Gas Fracking

  Qatar Fund, Canary Wharf Plan $1.6 Billion London Project

  Talks on Telecommunications Treaty Falter

  Investors Stay Calm, if Cautious, as Stalemate Simmers

  Fed Ties Rates To Jobs Recovery, Adds To Stimulus

  Home Seizures Rise as Banks Adjust to Foreclosure Flow

  Khosla Ventures Hires Condoleezza Rice as Adviser

  Clearwire Buyout by Sprint Seen Best For Owners

  Airline Profit Outlook Raised 63% by IATA on Capacity Cut

  Buffett Expands Buyback to Pay Up to 120% of Book Value

  Obama’s Bet on GM Hangs on New Pickup Boosting Share Price

  Amazon Wins EU E-Book Pricing Battle With Apple

  Roger Nusbaum: 12/12/12

  Walter Kurtz: Fed Targets More Treasury Purchases. So Why The Sell-off in Bonds?

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• Today’s Fed Statement
  Eddy Elfenbein, December 12th, 2012 at 12:53 pm

  Here’s today’s Fed statement:

  Information received since the Federal Open Market Committee met in October suggests that economic activity and employment have continued to expand at a moderate pace in recent months, apart from weather-related disruptions. Although the unemployment rate has declined somewhat since the summer, it remains elevated. Household spending has continued to advance, and the housing sector has shown further signs of improvement, but growth in business fixed investment has slowed. Inflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable.

  Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.

  To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and, in January, will resume rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

  The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.

  To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. The Committee views these thresholds as consistent with its earlier date-based guidance. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.

  Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed the asset purchase program and the characterization of the conditions under which an exceptionally low range for the federal funds rate will be appropriate.

• Nicholas Financial = $14.12
  Eddy Elfenbein, December 12th, 2012 at 9:46 am

  Nicholas Financial ($NICK) is currently at $14.12 this morning. I don’t know if it will hold up, but here we are.

  I also see that AFLAC ($AFL) has been as high as $54.70 this morning.

• Morning News: December 12, 2012
  Eddy Elfenbein, December 12th, 2012 at 7:15 am

  Europe Seeks To End Discord Over Banking Union

  U.K. Unemployment Falls in Sign of Labor-Market Resilience

  Euro Zone Factory Output Falls Again, Recovery Far Off

  China Woos Overseas Companies, Looking for Deals

  Hedge Funds Stride the Stage of World Affairs

  OPEC Uniting to Keep Quota as Oil Heads for Best Year

  Unlikely Backers in a Battle Over Taxes

  Michigan Puts Limits On Unions

  Amazon, Massachusetts Strike Deal For Residents On Sales Tax

  Delta Buys 49% Virgin Atlantic Stake for NYC-U.K. Service

  McDonald’s $8.25 Man and $8.75 Million CEO Shows Pay Gap

  HSBC to Pay Record Fine to Settle Money-Laundering Charges

  AIG Bailout Exit No Finish Line as CEO Narrows Focus

  Joshua Brown: Mission Accomplished

  Credit Writedowns: The Great Migration of the 21st Century

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• BOOM! Nicholas Financial Declares Special $2 Per Share Dividend
  Eddy Elfenbein, December 11th, 2012 at 5:26 pm

  Impressive. After the close today, Nicholas Financial ($NICK) declared a special $2 per share dividend. Going by NICK’s close today, that’s a 15% return.

  CLEARWATER, Fla., Dec. 11, 2012 — Nicholas Financial, Inc. (NICK) announced today that its Board of Directors has declared a special cash dividend of $2.00 per share on its common stock to be paid on December 28, 2012 to shareholders of record as of December 21, 2012.

  Peter L. Vosotas, Chairman and CEO noted, “Today’s announcement of a $2.00 special cash dividend, to be paid before the end of the calendar year, is our effort to return capital to our shareholders in the most tax efficient manner as possible. Our strong balance sheet and favorable access to the credit markets allow us to provide shareholders with this dividend while maintaining our conservative capital structure. The payment is in addition to our $0.12 cent quarterly dividend paid on December 6. Based on the decision to pay this special dividend, the company may elect to forego future dividends.

  Although NICK’s HQ is in Florida, it’s actually a Canadian company so the dividend will be subject to foreign tax rules (please consult your advisor on these matters).

• Looking At This Week’s Fed Meeting
  Eddy Elfenbein, December 11th, 2012 at 3:10 pm

  The Federal Reserve meets today and tomorrow, and Ben Bernanke will hold a press conference tomorrow. There may actually be news to come from this meeting.

  For one, the Fed will release a summary of its economic projections. Although Q4 looks like it will be a dud for GDP, there’s renewed optimism for above-trend growth next year.

  The Fed will also probably extend some of its bond-buying programs. Operation Twist expires at the end of the year, although its impact has probably been very minor. I expect the Fed to announce some sort of program extension but I can’t say what.

  There’s also the issue of what metric to follow when looking at monetary policy. Meaning, the Fed ought to continue to use quantitative easing until X happens. What’s X then? This idea is clearly bouncing around the Fed. The most popular idea in the blogosphere is for the Fed to target nominal GDP growth. I think the Fed may also consider growth in non-farm payrolls. Remember the C of FOMC is for committee so it may be a compromise.

  The Fed has also taken to announcing when they expect interest rates to rise. I’m now at the point where I suspect that it may be too early to even guess. Most Fed members think rates will go up sometime in 2015. That seems so far away that I don’t know how much value it has. But the message to the market is to not wait for rates any time soon. However, the rather poor performance of gold suggests that some folks think rates could soon rise.

  We’ll know more tomorrow.

• The S&P 500 Breaks 1,430
  Eddy Elfenbein, December 11th, 2012 at 12:19 pm

  The stock market is having a good day on the news of progress regarding Fiscal Cliff talks. The S&P 500 got as high as 1,434.27 which oddly exactly matched its high from November 2nd.

  I’ve told investors not to worry about these silly Fiscal Cliff stories. The fundamentals of the market, for now, are very good. We may bounce around but the trend is in favor of the bulls. I still think the S&P 500 will break 1,500 within the next few months.

  One small point of worry is that the Republicans and Democrats may wind up using the market as the ultimate veto. In other words, they’ll refuse to compromise long enough until the market has a big down day. Once that happens, they’ll finally be able to reach a serious deal since they can pretend that they were saving the market from the evil machinations of the other side. Bear in mind that end-of-the year 401k statements will be going out soon. No politician wants to be blamed for bad news.

  The S&P 500 is still holding up well despite some negative comments from House Speaker John Boehner.

  Good news for Stryker ($SYK). Goldman Sachs upgraded the stock from Neutral to Buy. The shares are up about 2% today.

• Morning News: December 11, 2012
  Eddy Elfenbein, December 11th, 2012 at 7:05 am

  German Confidence Lifts Europe Shares To 18-Month High

  Greek Banks Set To Top Up Bids To Meet Buyback Target

  Monti Resignation Announcement Causes Fears Of Renewed Euro Turbulence

  Boom in Mongolia Deflates After Deal That Started It Is Threatened

  Gold Prices Rise on Euro-Zone Uncertainty

  Fed Seen Pumping Up Assets to $4 Trillion in New Buying

  Bailout Over, U.S. Treasury Plans to Sell A.I.G. Shares

  A Cooperative Approach on ‘Too Big to Fail’ Banks

  Amgen to Acquire the Gene-Hunting Firm deCODE

  Diageo Ends Cuervo Talks, Will Terminate Distribution Deal

  McDonald’s Sales Delivers

  Ingersoll to Spin Off Security Unit

  HSBC to Pay $1.92 Billion to Settle Charges of Money Laundering

  Jeff Carter: Gregoire is Wrong on Internet Taxes

  John Hempton: Trust Me – I Run A Pyramid Marketing Scheme

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