Author Archive

  • Ford Posts Best March Sales in Five Years
    , April 3rd, 2012 at 12:15 pm

    From the press release:

    Ford Motor Company posted its best March U.S. sales month since 2007 – with the Ford Fusion recording its best month ever, Ford Focus and Ford Edge achieving their best March ever and the F-Series showing the strongest March sales in five years.

    Total company sales totaled 223,418 vehicles for March, a 5 percent gain over year-ago levels. Retail sales increased 11 percent for the month.

    For the first quarter, Ford Motor Company’s sales were up 9 percent versus year-ago levels, totaling 539,247 vehicles sold. The increases were driven by the popularity of Ford’s most fuel-efficient models posting record sales months.

    “Rising gas prices continued to drive strong customer demand for Ford’s fuel-efficient vehicles throughout March and the first quarter,” said Ken Czubay, vice president, U.S. Marketing, Sales and Service. “Ford is answering the call with what we call the power of choice – a full family of cars, utilities and trucks that offer leading fuel economy in their classes.”

    March sales highlights:

    * Fusion set an all-time monthly sales record, with 28,562 vehicles sold.

    * Focus delivered its best March sales performance ever, selling 28,293 cars.

    * F-Series sold 58,061 for the month – a 9 percent increase versus last March and F-Series’ best March sales performance since 2007. EcoBoost accounted for 41 percent of the F-150 retail sales, with all V6 engines comprising 56 percent for the month.

    * The Ford Edge had it best March sales month ever, with 14,058 vehicles sold.

    * Ford began selling its Police Interceptor Sedans and Utilities at the end of March.

    During the first quarter:

    * Car sales at Ford Motor Company were up 8 percent. The fuel-efficient Focus was the biggest seller among Ford’s car lineup, with sales up 78 percent during this period, with 66,043 vehicles sold.

    * Utility sales totaled 150,415 vehicles, a 6 percent increase versus year-ago levels. Escape sales were up 5 percent, making it the strongest-ever first quarter start for Escape – America’s best-selling utility.

    * Ford Motor Company truck sales increased 11 percent, with 195,807 vehicles sold. F-Series pickups – America’s top-selling truck for 35 years – posted sales of 143,827 vehicles for the quarter, a 14-percent increase versus the same period in 2011.

  • Dividends Are Making a Comeback
    , April 3rd, 2012 at 11:04 am

    Now that the first quarter is over, we have some stats on dividends. The S&P 500 paid out 7.09 in dividends (that’s the number adjusted for the index) which is a 15.06% increase over the first quarter of 2011.

    I think this will be a very good year for dividends, especially with the dividend news from Apple ($AAPL). The market also responded very well to the five-fold dividend increase from CA Technologies ($CA), plus the recent increase at JPMorgan ($JPM). So far this year, there have been 122 dividend increases in the S&P 500, plus seven new dividend payers. Only three companies have lowered their payouts.

    Looking at dividends has been a surprisingly good way of valuing the market over the past few years. You can never be quite sure about a company’s earnings or cash flow since accounting rules allow for enormous latitude. But if a company is willing to send shareholders a check, you can be pretty certain those numbers are legit (though not always).

    Dividends also tend to be very stable. Once a company raises its quarterly dividend, there’s an implicit understanding that that’s the new level. Shareholders will put up with a lot, but they do not like cuts in dividends, and woe be unto the company that lowers their payout. The recent recession, however, saw an unusually higher number of cut dividends or suspended payouts altogether. In 2009, annual dividends dropped by 21%. Contrast this with 2001 when the stock market crash led to dividends falling by just 3%.

    The lower dividends this time around have been largely concentrated in the financial sector. Part of this is due to rules around receiving TARP payments. I don’t have the exact numbers for the financial sector but the quarterly dividends for the Financial Sector ETF ($XLF) fell about 70%. The Financial Sector currently makes up 15% of the S&P 500.

    The good news is that higher profits are leading to higher dividends. Dividends are on pace to hit a new record this year. On top of that, the dividend payout ratio—the percent of profits paid out as dividends—is still below 30% which is far below normal.

    Here’s a look at the S&P 500 in the black line along with its dividends in the blue line. The black line follows the left scale and the blue line follows the right. The two lines are scaled at a ratio of 50-to-1 which means that the S&P 500 yields exactly 2% whenever the lines cross.

    I think the chart shows some interesting facts. For example, you can see how different the market crashes of 2000-01 and 2008-09 were. In the first, prices soared above fundamentals. In the latter, fundamentals crumbled beneath the price. From 2003 to 2007, stock prices generally followed the trend in dividends. We can also see how much investors panicked during the financial crisis. In March 2009, the S&P 500’s dividend yield eventually reached 4%.

    I asked Howard Silverblatt, the head stat guy at S&P, to tell me the dividend estimate for this year. He said it’s $29.70. To equal a dividend yield of 2%, the S&P 500 needs to get to 1,485 which is a 4.6% jump by the end of the year.

  • Backstage Wall Street
    , April 3rd, 2012 at 10:11 am

    Josh Brown discusses his new book, Backstage Wall Street, with Joe Weisenthal.

  • Morning News: April 3, 2012
    , April 3rd, 2012 at 5:48 am

    DAX Beating S&P 500 by Most Since ’06 on Economy Optimism

    PBOC’s Zhou Urges Fed to Consider Global Effect of Policy Easing

    Did Spain Commit Economic Suicide?

    Regulator Accuses R.B.C. of ‘Massive’ Trading Scheme

    U.S. Economy Enters Sweet Spot as China Slows

    US Stocks Climb To Multiyear Highs After Manufacturing Data

    Where Housing Once Boomed, Recovery Lags

    Oil Drops After Biggest Gain in Six Weeks on Supplies

    ‘Apple Fever’ to Push Stock to $1,001, Topeka Capital Says

    JPMorgan Lead Over Morgan Stanley Widening on Rating Cuts

    Small Banks Shift Charters to Avoid U.S. as Regulator

    Groupon Hit as Analysts Question Model

    F.T.C. Approves Merger of 2 of the Biggest Pharmacy Benefit Managers

    Coty Low-Ball Offer Seen Emerging as Avon’s Best Option

    Roger Nusbaum: Real Life Retirement Example

    Edward Harrison: Faber: Japanese Stocks Will Outperform as US Margins Deteriorate

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  • The S&P 500 Breaks 1,420
    , April 2nd, 2012 at 12:12 pm

    For the first time since May 2008, the S&P 500 is trading above 1,420. Here’s a look at the S&P 500 Total Return Index, meaning with dividends included.

    From the end of March 2000 to the end of March 2012, the S&P 500 lost 6.01%. With dividends, it gained 17.55%. Inflation was 34.1%.

  • March ISM = 53.4
    , April 2nd, 2012 at 10:11 am

    The ISM report for March just came out at 53.4. Since 1948, the ISM has been between 53.0 and 54.0 a total of 48 times. Not once has been during a recession.

  • Investors Willing to Take on More Risk
    , April 2nd, 2012 at 9:27 am

    Here’s a thought exercise:

    Imagine you have two stocks (let’s call them A and B) that are equal in every way. Both stocks are expected to earn $1 per share this year. However, there is one small difference. Stock A is expected to earn $1 per share, plus or minus two cents. Stock B is expected to earn $1 per share, plus or minus 20 cents.

    So here’s the question: Which stock is worth more?

    The answer is that in most instances, we can assume that stock A is worth more. On occasion, stock B might be worth more, but as a general rule, it will be stock A. The reason why is that investors hate losses more than they like gains. That’s a very important point in finance and in human nature in general.

    As the two stocks trade, the gap between them will vary. The point I’ve been trying to make about Wall Street right now is that, in terms of this exercise, stock A is worth much, much more than stock B. This is due to the concerns that hit the market last year that sent investors rushing to “sure thing” investments.

    The story for this year is that those concerns have been slowly melting away. In other words, stock B is closing the gap. Eric Falkenstein noted that low-vol strategies (which I have written about before) have been trailing the market this year.

    Today is the first trading day of the second quarter and Wall Street just wrapped up its best quarter in over a decade. The Wall Street Journal writes today about the theme I’ve been harping on—that investors have willing to shoulder more risk.

    Also reflecting the improved outlook, investors have scaled back holdings of high-quality, low-yielding government debt that had been a haven from last year’s turmoil. Willing to take on greater risks, and hungry for yield with interest rates locked at low levels, they have poured money lower-quality bonds, such as high-yield corporate debt.

    Stock-market gains aside, capital markets have a more becalmed air than at the beginning of the year. One tell-tale sign of the more normal environment is that stocks are moving less in lockstep with other assets than during the second half of 2011.

    Last year, in a reflection of extreme levels of uncertainty and worries about Europe, correlations between different investments hit historic highs. Riskier assets—including stocks, commodities or emerging market currencies—would either rally together on “risk on” trading on days where investors were confident, or sell off as worried investors rushed for safety when markets were in “risk off” mode.

    This could be clearly seen in the tendency of the U.S. dollar and U.S. stocks to move in predictable fashion. When the dollar rose, stocks fell and vice versa. Historically, there has been no correlation between the two, reflecting the different nature of the two assets.

    But when fears of a euro-zone breakup hit a fever pitch last November and December, stocks—seen as a risky investment—would move in the opposite direction of the dollar—seen as a haven—60% or 70% of the time.

    Now that “inverse correlation” is down to around 30%, according to data from Macro Risk Advisors.

    Related to this, volatility has dropped dramatically, The WSJ notes that in the fourth quarter, there were 14 daily moves of 2% or more. But in the first quarter of 2012, there were zero moves that dramatic.

    I think it’s interesting that analysts have reversed course recently by raising full-year earnings estimates over the past month. In January and February, estimates had been coming down. The consensus now is that the S&P 500 will earn $104.37 this year. This means the stock market is 11% below the average P/E Ratio of the last 58 years.

  • Morning News: April 2, 2012
    , April 2nd, 2012 at 7:48 am

    Euro Leaders Seek Global Help After Firewall Boosted

    Euro-Region Unemployment Surges to Highest in More Than 14 Years

    Corporate Japan Defies Nikkei’s Rise

    Chalco Agrees to Buy Ivanhoe SouthGobi Stake in Takeover Offer

    DBS to Test Indonesian Openness With $7.2 Billion Takeover

    Bond King’s Trade Pays Off

    Oil Eases Below $123 After First-quarter Rally

    As Foreclosure Problems Persist, Fed Seeks More Fines

    Apple’s Chief Puts Stamp on Labor Issues

    Card Processor: Hackers Stole Account Numbers

    Pinnacle Airlines Seeks Chapter 11 Bankruptcy Protection

    Goldman Sachs Eyes $3 Billion Property Debt Fund

    Wells Fargo Opens Business for the Ultra-wealthy

    Census Bureau Rejects NYC Challenge

    Howard Lindzon: My Thoughts on Crowdfunding

    Jeff Miller: Weighing the Week Ahead: Can Job Growth be Improved?

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  • The Turnaround at Ford
    , March 31st, 2012 at 7:04 pm

    This is from a NYT review of “American Icon: Alan Mulally and the Fight to Save Ford Motor Company.”

    In 2008, the Ford Motor Company seemed caught in a death spiral.

    The company was hemorrhaging cash — more than $83 million a day — as the bottom fell out of the car market. In late autumn, Ford’s stock price bottomed out at $1.01.

    Move forward three years. For 2011, Ford turned a net profit of $20 billion on sales of $128 billion. It distributed profit-sharing payments of about $6,200 to each of 41,600 eligible employees. On Friday, its stock closed at $12.48.

    (…)

    First, Mr. Mulally knew that Ford could not hope to improve its market performance without simultaneously changing its culture. Some of the book’s most interesting passages deal with his efforts — often one person at a time — to improve accountability and to foster commitment among executives.

    Mr. Mulally’s chief instrument here was data-driven management, in which each executive was responsible for consistently knowing and reporting how his — very few women appear in this story — department was performing. Concentrating on consistent metrics, he argued early on, would focus managerial attention on the big picture while increasing transparency.

    He eliminated all corporate-level meetings except for two he introduced: the weekly, mandatory business plan review, when the senior team reported its progress on specific goals, and the special-attention review, when executives took up issues needing in-depth consideration. Over time, both meetings — which occurred daily in crucial periods — would become the highway on which Ford’s leaders drove change.

  • Technical Issues
    , March 30th, 2012 at 1:22 pm

    I apologize for the delay in getting this week’s CWS Market Review emailed out to everyone. We’re having some technical issues that we’re trying to address. Fortunately, we were able to post the text below.