Archive for January, 2016

• Morning News: January 7, 2016
  Eddy Elfenbein, January 7th, 2016 at 6:50 am

  World Bank Cuts Global Growth Forecasts

  UK Warns of ‘Dangerous Cocktail’ of Economic Threats

  Italy’s Jobless Rate Falls to Three-Year Low in Boost for Renzi

  China Lets Yuan Fall Faster, Share Trading Suspended as Prices Tumble

  $30 Oil Just Got Closer as WTI Slides to 12-Year Low on China

  Fed Minutes Reveal Officials’ Concern About Low Inflation

  United CEO Munoz Has Heart Transplant With Return Still Seen

  Yahoo Said to Propose Job Cuts as Part of Mayer’s Revival Plan

  L’Oréal Takes the Wearables War to the Beauty Counter

  Uber’s First Casualty? San Francisco’s Largest Taxi Company Filing For Bankruptcy

  Deutsche Telekom Under Scrutiny Over Working Conditions at U.S. Arm T-Mobile

  Apple’s Top Five Aside From CEO Paid $25 Million Each for 2015

  TransCanada to Sue U.S. for Blocking Keystone XL Pipeline

  Jeff Carter: Similarities Between Trading and Seed Investing

  Roger Nusbaum: Did Anyone Get The License Plate of That Market?

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• Oil Falls to 12-Year Low
  Eddy Elfenbein, January 6th, 2016 at 5:40 pm

  The spot price for West Texas Intermediate closed today at $33.97 per barrel. That was one penny below the close from February 12, 2009. Before that, we have to go back February 10, 2004.

  

  The Dow closed lower today than where it was exactly 19 months ago. The S&P 500 High Beta index is technically in a bear market (more than 20% off its high). The index is now down 22.09% while the S&P 500 Low Vol index is down a scant 3.36%.

  Here’s a list of country ETFs that were at or very near new lows today.

  Brazil
  Russia
  Norway
  Greece
  Canada
  France
  Malaysia
  Netherlands
  Poland
  Singapore
  Spain
  Sweden
  Thailand
  United Kingdom

• The S&P 500 Falls to a Three-Month Low
  Eddy Elfenbein, January 6th, 2016 at 11:27 am

  The stock market is down again today. The S&P 500 has been as low as 1,986.02 this morning. That’s a three-month low.

  In September, I was on Bloomberg TV and was asked my biggest market concern. I said North Korea. The problem with North Korea is that the regime simply doesn’t care what the world thinks. They now claim to have exploded a hydrogen bomb. Who knows? It will take weeks to figure out what really happened, but it underscores the point that this is a dysfunctional regime.

  In China, the yuan has been allowed to sink even lower. This is having ripple effects across the region and around the world. The main Emerging Markets ETF (EEM) is at a six-and-a-half year low today.

  

  Later today, the Fed will release the meetings of their last meeting, the one in which they decided to raise interest rates. The futures market is now leaning towards expecting a second rate hike in March, but after that, they expect some calm times. A third hike isn’t expected until November, just six days before Election Day.

• Another Good Quarter for Dividends
  Eddy Elfenbein, January 6th, 2016 at 8:26 am

  The fourth quarter was another strong quarter for dividends. Last quarter, dividend payouts rose by 8.38%. This was the 23rd quarter in a row of dividend growth.

  For the year, dividends rose by 10.00%. This was the fifth year in a row of double-digit dividend growth. Since 2010, dividends are up by 90.89% compared with an increase of 62.52% for the S&P 500. That means that despite all the bubble talk, the market’s dividend yield has been increasing. If this has been a bull market, then it’s been one for dividends.

  For 2015, the S&P 500 paid out $43.39 in dividends. That’s the index-adjusted number (every one point in the S&P 500 is worth about $8.75 billion). Going by the closing price at the end of the year, the S&P 500 has a dividend yield of 2.12%, based on trailing dividends.

  I would never say that the dividend is the best or only valuation measure you should use, but it’s a decent one. What’s interesting is that, except for the worst of the financial crisis, the market has tracked a 2% dividend reasonably closely for over 10 years. This should be another good year for dividends but I’m expecting dividend growth of 5% to 8%.

  In the chart below, the S&P 500 is the blue line and it follows the left scale. The dividends are in red and they follow the right scale. Notice how much smoother dividends are. The two lines are scaled at a ratio of 50-to-1. That means whenever the lines cross, the market’s yield is exactly 2%.

  

• Morning News: January 6, 2016
  Eddy Elfenbein, January 6th, 2016 at 7:00 am

  Dragon Tail Risk for World Economy on Higher Fear of China Slump

  Eurozone Growth Accelerated at End of 2015

  Pressure Grows on Saudi Arabia to Ditch Dollar Peg

  Oil Prices Fall to 11-Year Low

  Bernie Sanders Attacks Hillary Clinton Over Regulating Wall Street

  Pickups and S.U.V.s Lead Way to a Record Year for Automakers

  China Asks Microsoft to Explain ‘Major Problems’ in Probe Data

  ‘Brain-Training’ App Lumosity Will Pay $2 Million for Deceptive Advertising

  Ford’s December And The Optimism Going Into 2016

  Toyota Hires Artificial Intelligence Gurus For Self-Driving Cars

  Wall Street to Get Graded on How Much Spoofing It’s Facilitating

  Bank Options Turn Bearish as Favorite 2015 Trades Keep Unwinding

  Valeant to Appoint Interim CEO as Pearson Remains Hospitalized

  Cullen Roche: Why Hedge Funds Are Sucking Wind

  Joshua Brown: The Riskalyze Report: Advisors Get Back to Basics

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• Ford’s Sales Miss Expectations
  Eddy Elfenbein, January 5th, 2016 at 9:20 pm

  Today was a rough day for shares of Ford Motor (F). The automaker got as low as $13.51 today before closing at $13.72. The catalyst for the selling was a December sales report that missed expectations.

  Ford Motor Co.’s U.S. sales rose 8.4% in December, compared to a year earlier, and 5.3% for the year.

  In what’s likely to be a record year U.S. auto sales, the automaker sold 2.61 million vehicles, marking its best performance in nine years.

  But December’s increase trailed Edmunds.com analyst expectations of 11% growth.

  The Ford brand rose 8.2% in December and 5.3% for the year, and the Lincoln luxury brand rose 12.1% in December and 7.1% for the year.

  Like the rest of the industry, Ford reported a sharp shift from cars into crossovers, sport-utility vehicles and pickup trucks.

  Sales of the company’s crossovers and SUVs rose 13.6% in December and 7.8% for the year, while truck sales rose 13% in December and 8.7% for the year.

  But car sales slumped 4.2% in December and 0.9% for the year.

  Ford will report Q4 earnings later this month. Wall Street expects earnings of 47 cents per share which is compared with 26 cents per share in Q4 of 2014.

• The High Quality ETF
  Eddy Elfenbein, January 5th, 2016 at 3:19 pm

  I often talk about the importance of investing in high quality stocks. There actually is an S&P 500 High Quality ETF (SPHQ). The ETF has done very well the last few years.

  

  Here’s something interesting about high quality stocks as an asset class. Check out the relative strength of SPHQ (meaning, dividing its price by the S&P 500) during the last year.

  

  Notice how it spiked last August when the market got scared and there were all those ETF issues. In other words, the SPHQ is also a fear trade. When people get scared, they run all at once towards quality.

• Jim Cramer Talks with CEO of ADS
  Eddy Elfenbein, January 5th, 2016 at 10:41 am

  This is from May but it tells you a lot about Alliance Data Systems.

• Morning News: January 5, 2016
  Eddy Elfenbein, January 5th, 2016 at 6:48 am

  Euro-Area Inflation Stuck Close to Zero May Pressure ECB

  China Battles to Shore Up World’s Priciest Stock Market

  Stocks Hold Steady After Starting Year With a Sell-Off

  Puerto Rico Defaults on Debt Payments

  The $289 Billion Wipeout That Blindsided U.S. Bulls

  Dalian Wanda of China May Buy Majority Stake in Legendary Entertainment

  Gene-Editing Drugmaker Backed by Google, Gates Files for IPO

  Ex-Soros’s Bessent Raises $4.5 Billion for New Hedge Fund Firm

  G.M. Chief Mary Barra Is Named Chairwoman, Affirming Her Leadership

  GM Invests $500 Million in Lyft, Sets Out Self-Driving Car Partnership

  Ford Will Expand Self-Driving Test Car Fleet to 30

  Volkswagen Faces Billions in Fines as U.S. Sues For Environmental Violations

  2016 Outlook: Can Berkshire Snap Its Losing Streak?

  Jeff Carter: Tax Exempt Investing

  Roger Nusbaum: A Wild Ride to Nowhere

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• Worst Start of the Year in 84 Years
  Eddy Elfenbein, January 4th, 2016 at 2:02 pm

  Today was a terrible start for the market. The S&P 500 dropped below 2,000 and at its low was down 2.65% on the day. The Dow was down more than 460 points although both indexes have recovered some lost ground.

  

  This could be the largest opening day decline since 1932. Markets all over the world have been rattled by the decline in China. Trading in China was shut down after the market fell by 7%. Some economic indicators there continued to be lousy.