Archive for July, 2015

• Morning News: July 10, 2015
  Eddy Elfenbein, July 10th, 2015 at 7:03 am

  France Hails Greek Aid Proposals as Germany Reserves Judgment

  Greek Parliament to Back Plan, Says Party Leader

  China’s Stock-Market Woes Trace Roots to Earlier Stimulus

  Ignore the ‘Faint Whiff of Panic;’ Global Growth Is Accelerating

  Water, Water Everywhere? Caribbean Adds to Global Drought

  Oil Pares Gain as IEA Sees Lower Price While Iran Talks Drag On

  Big Oil Wins Again: Why BP Isn’t Sweating Its “Historic” Gulf Spill Settlement

  eBay’s Enterprise Unit Takes a Hit Amid Sale Talks

  Reinventing Google for a Mobile World

  Splunk Just Spent Millions To Buy a Hot Security Startup

  China Fears Propel Apple Shares Toward Five-Day Losing Streak

  Facebook Said to Seek Music Video Licensing Deals

  Takata Says No to Fund for Victims of Defective Airbag

  Joshua Brown: Firebreak

  Jeff Miller: Evaluating the Risk From the Chinese Stock Bubble

  Be sure to follow me on Twitter.

• Energy Resumes Downtrend
  Eddy Elfenbein, July 9th, 2015 at 11:48 am

  Energy stocks badly lagged the market during the second half of last year. That seemed to have ended this year, but it didn’t last. Energy stocks have again started to lag the market.

  Check out this chart of the relative strength of the Energy Sector ETF (XLE):

  

• Morning News: July 9, 2015
  Eddy Elfenbein, July 9th, 2015 at 7:15 am

  EU’s Tusk Latest to Urge Some Greek Debt Help

  Proof That Merkel Is Europe’s Economic Bully

  Deal or No Deal, Greece Faces a Difficult Aftermath

  Irrational Exuberance Triggers Chaos as China Watchdog Sidelined

  Trans-Pacific Partnership’s Potential Impact Weighed in Asia and U.S.

  Oil Rout Seen Ending as Demand Trumps China’s Market Crash

  The Stock Market Bell Rings, Computers Fail, Wall Street Cringes

  IBM Announces Computer Chips More Powerful Than Any In Existence

  PepsiCo Profit, Revenue Beat Estimates as Higher Pricing Pays Off

  Walgreens Beats Earnings Estimates and Appoints Pessina CEO

  Albertsons Grocery Chain Makes Plans For Initial Public Offering

  Alfa Oil Dream Falters as $1.7 Billion Pacific Bid Withdrawn

  With Options Dwindling, BP Seized a Chance to Settle Oil Spill Case

  Howard Lindzon: The China Panic

  Roger Nusbaum: The Futility of Retirement Calculators

  Be sure to follow me on Twitter.

• No Reason to Panic
  Eddy Elfenbein, July 8th, 2015 at 2:57 pm

  The NYSE has said that they want to open at 3:10 pm. We’re about there.

  The key for investors is that there’s no reason to panic. This only impacts trading on the NYSE. When you place a buy order, it automatically goes to the lowest price it can find. The computers have lots of exchanges to choose from. The closure of the NYSE has little to no impact on today’s market.

• Stock Returns and Inflation Expectations
  Eddy Elfenbein, July 8th, 2015 at 2:35 pm

  I wanted to see how well the stock market has performed at different points of the 10-year breakeven inflation rate. I took the Wilshire 5000 Total Return index and saw how it performed against the 10-year breakeven.

  The results are interesting.

  Since 2003, the Wilshire 5000 has gained 14.54% when the 10-year breakeven is 2.36% or less.

  When it’s 2.37% or more, the Wilshire has an annualized loss of 0.21%.

  Since 2003, the 10-year breakeven inflation rate has been 2.36% or less about two-thirds of the time. It’s currently at 1.87%. It’s been below 2.36% continuously since April 30, 2013.

• NYSE Halts All Trading
  Eddy Elfenbein, July 8th, 2015 at 11:50 am

  The New York Stock Exchange has halted all trading. I don’t know the details but it appears to be a technical issue. Trading stopped at 11:32 am.

  Update: Trading is still closed on the NYSE. Remember that NYSE-listed securities still trade on other exchanges. The NYSE said it is an internal issue, not an outside cyber attack.

• Morning News: July 8, 2015
  Eddy Elfenbein, July 8th, 2015 at 7:11 am

  Greece Faces Euro Exit Unless Demands Accepted by Sunday

  Tsipras Pleads For Fair Deal For Greece in EU Parliament

  China Stocks Plunge as State Support Fails to Revive Confidence

  Market’s Dive Could Delay Economic Reforms in China

  OECD Indicators Point to Growth Slowdown in Major Economies

  Nissan Says Takata Air Bag Inflator Caused Fire in Japan Crash

  Major Job Cuts Expected at Microsoft

  Why Amazon Should Fear Alibaba

  Didi Kuaidi Raises $2 Billion in Fresh Funding

  Disney Wins City Tax Deal in Exchange for $1 Billion Park Pledge

  Hostess CEO Says No Plan For Twinkie IPO

  Barclays’s McFarlane Ousts CEO, Criticizes Cumbersome Bank

  Corzine, Other Ex-MF Global Officials Settle Suit for $64.5 Million

  Cullen Roche: Never Invest in Something You Cannot Understand

  Credit Writedowns: More on Greek Tax Anticipation Note IOUs

  Be sure to follow me on Twitter.

• Below 2,050
  Eddy Elfenbein, July 7th, 2015 at 10:47 am

  For the first time since April 1, the S&P 500 is below 2,050.

  

  The index has also given up its 200-day moving average.

  

  The S&P 500 has had a pretty good run of staying above its 200-DMA. There was a brief stretch of six days last October when the index drifted below its 200-DMA (thanks to Ebola). Before that, the last time the S&P 500 closed below its 200-DMA was November 16, 2012.

• How to Game the Market
  Eddy Elfenbein, July 7th, 2015 at 8:30 am

  From Bloomberg:

  It’s an easy way to game the stock market, and getting easier by the day.

  With some deft maneuvers, hedge funds and Wall Street trading desks are reaping hundreds of millions at the expense of index mutual funds, the investments of choice for a growing number of ordinary Americans.

  The tactic, in some ways, resembles illegal front-running – – but in this case, it’s perfectly fine. The traders are simply buying stocks before they’re added to the indexes that, by definition, index funds must track.

  As the popularity of index investing soars to new heights, the emergence of index front-running is raising fundamental questions about so-called passive investment strategies, as well as how indexes are compiled and the role the funds themselves play in elevating costs. By one estimate, it gouges owners of funds tracking the Standard & Poor’s 500 Index to the tune of $4.3 billion a year, a sum that can double or even triple the cost of such investments.

  “Portfolio managers are aware of it, but some of them will say ‘My clients demand an index fund, and I’m going to give it to them come hell or high water,’” Michael Rawson, an analyst at Morningstar Inc., said from Chicago. “Yes, you matched the index return, but the investor is now worse off. You don’t hear about that as much.”

• “Fixed Income is Always a Good Foundation for a Portfolio”
  Eddy Elfenbein, July 7th, 2015 at 7:52 am

  From Simon Constable at the Wall Street Journal:

  Given the expected rise in interest rates, does your portfolio still need a healthy allocation of bonds? Probably yes, according to the experts.

  Many agree that the security and diversification bonds offer shouldn’t be spurned just because the direction of rates could be changing. But, depending on the investor, now may be a good time to adjust the size of that allocation and its contents, with regard to lengths of maturities and levels of risk.

  “Fixed income is always a good foundation for a portfolio,” says Eddy Elfenbein, Washington, D.C., author of the Crossing Wall Street blog and newsletter. “Security and safety.… Each month and quarter there is a regular check from the coupons.”

  Mr. Elfenbein says he generally suggests a 30% allocation in bonds once investors hit 40, and an increasing allocation as the years progress. Younger investors may want to be in stocks only, he says, because they will be able to weather more market swings.