Archive for July, 2014

• Morning News: July 2, 2014
  Eddy Elfenbein, July 2nd, 2014 at 7:04 am

  World’s ATM Moves to Frankfurt as Yellen’s Fed Slows Cash

  Hong Kong Stocks Close at Year’s High on Factory Data

  German, French Defense Companies Plan Alliance

  Orange Fails to Reach Deal on French Wireless Consolidation

  Puerto Rico Downgrade Raises Default Fears

  Google in Deal for Songza, a Music Playlist Service

  McDonald’s, Taco Bell, KFC Laggards in U.S. Fast-Food Survey

  Nike Is Dominating The World Cup – Here’s Why

  Seragon Pharmaceuticals Announces Acquisition Agreement With Genentech

  How Can GM, Embroiled in a Recall Crisis, Continue to Post Strong Sales?

  BNP Growth Plan at Risk as Penalties to Mar U.S. Expansion

  Jamie Dimon Diagnosed With Throat Cancer: What He Can Expect

  Coatue Bids Farewell to Noto Before He Starts

  Roger Nusbaum: Alternative Investments: The Right Expectations

  Jeff Carter: Now Is The Time to Invest in VC

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• Breaking Down the Year So Far
  Eddy Elfenbein, July 1st, 2014 at 12:03 pm

  Here’s a look at the relative strength graph so far this year. I took each of the Total Return Indexes for the S&P 500 sectors and divided them by the S&P 500’s Total Return Index. I then set each one to 100 to start the year.

  

  In plainer terms, a rising line means a sector is beating the market and a falling one means it’s losing. I apologize if this chart is hard to read but it’s a good way to see what’s been working this year and what hasn’t. (I didn’t include telecom since it’s only a few stocks and I didn’t want to crowd the graph.)

  Healthcare and Utilities ran out for a quick lead at the start of the year, but healthcare has been rather weak since. Materials stocks were strong in February. Starting in March, Energy stocks started coming on strong. That probably explains some of the weakness in our Buy List since we don’t have any Energy stocks. The best performing sector YTD is Utilities (+18.655). The worst is Consumer Discretionaries at +0.6%.

  Utility stocks started trailing the market in May, but have been leading the market over the past few weeks. In fact, a quiet theme this year has been the leadership tug-of-war between Utility stocks and Energy stocks. This probably reflects competing theses on the economy.

  It’s also interesting to see how poorly Consumer Discretionaries have been doing. Bear in mind that this sector had been crushing the market for more than four years.

• June ISM = 55.3
  Eddy Elfenbein, July 1st, 2014 at 11:31 am

  We had another good ISM Manufacturing number. For June, it was 55.3. This was 0.1 below last month’s number. If we had topped that, it would have been our fifth monthly increase in a row.

  The ISM has now been 49.0 or better for 60 months in a row. As I’ve discussed before, this is one of the better recession indicators. We’re still in the safe zone.

• The Mid-Year Rally
  Eddy Elfenbein, July 1st, 2014 at 11:21 am

  We’ve all heard about the Santa Claus Rally, but there’s a smaller historical rally that takes place around the middle of the year.

  I crunched the numbers for the entire Dow’s history going back to 1896 and found that the index gains an average of 1.18% from June 29 to July 9. That may not sound like a lot but consider what it means: 16% of the Dow’s entire capital gain for the year has come over a seven-day span. (The Santa Claus Rally is a more impressive gain of 2.94% from December 20 to January 7.)

  Historically, this mid-year seven-day spurt kicks off the big Summer Rally. The Dow has gained, on average, 3.69% from June 29 to September 6. That’s almost exactly half the Dow’s average yearly gain coming in just over two months.

  

• Another Big Quarter for Dividends
  Eddy Elfenbein, July 1st, 2014 at 10:59 am

  The numbers are in and it was another good quarter for dividends. The S&P 500 paid out $9.76 in dividends last quarter. That’s the index-adjusted number (each dollar in the index is about $8.9 billion). That’s an increase of 13.4% over a year ago.

  Dividends have now grown at a double-digit rate for 13 of the last 14 quarters. It would have been an even 14 for 14, but there was a dividend surge in Q4 of 2012 to beat the tax increase. As a result, dividends rose by 6.6% in Q4 of 2013. But adjusting for that, the dividend trend is still quite strong. Dividends paid out this year will probably be about 75% higher than they were four years ago.

  Here’s an interesting stat: First-half dividends are up 14.4% from last year’s first half, while the S&P 500 is up 6.05% YTD. Annualized, that’s about 12.5%. In other words, dividends are growing faster than stock prices.

  Believe it or not, the market’s dividend yield is slightly higher now than it was at the beginning of the year. I’m not saying that’s a perfect measure of value because it’s welcome push-back against this silly bubble talk.

  The big drag on dividends is still the financial sector. Major banks like Citigroup and Bank of America only pay a penny per share. The Financial Sector ETF ($XLF) will probably pay out around 38 cents per share this year. In 2007, it paid 86 cents per share.

  Here’s a look at the S&P 500 and its trailing dividends since 2003. The S&P 500 is the blue line and it follows the left scale. Dividends are in yellow and follow the right. The two lines are scaled at 50-to-1, so whenever the lines cross, the dividend yield is exactly 2%. For such a crude measure, that 2% line has worked pretty well.

  

• Morning News: July 1, 2014
  Eddy Elfenbein, July 1st, 2014 at 6:35 am

  German Jobless Rises Unexpectedly in June

  Japan Firms See Bigger Spending, Outlook Mixed: BOJ Tankan Survey

  Aussie Dollar Parity Talk Resumes

  U.S. Imposes Record $9 Billion Fine on BNP in Sanctions Warning to Banks

  Eyes on Impact of BNP Paribas Fine For Euro After Flat Inflation

  US Farmers Plant Record Soybean Crop, Less Corn

  GM’s Record Recall Expands: Is the Brand at Risk?

  Symantec Warns of Hacker Threat Against Energy Companies

  Samsung’s China Labor Problems Persist

  Peltz’s Trian Plants Its Flag in BNY Mellon

  CytoSport® To Be Acquired By Hormel Foods Corporation

  Ex-American Apparel CEO Dangerously Close to Majority Control

  Whopping Fine Could Change the Way Fundraisers for Charity Operate

  Cullen Roche: A Cheat Sheet for Understanding the Different Schools of Economics

  Epicurean Dealmaker: Touring Test

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