The One Chart That Explains It All
Posted by Eddy Elfenbein on December 7th, 2010 at 1:20 pm

I probably oversold this post with that title, but this chart will tell you a lot about what’s going on. Here you see the yield on the 30-year Treasury bond moving somewhat closely with the Morgan Stanley Cyclical Index (^CYC).

In other words, investors are taking on more risk. They’re leaving the safety of Treasury bonds while simultaneously raising the value of cyclical stocks.

What’s also happening is that the Volatility Index (^VIX) is falling. The VIX fell to 17.13 today. It was close to 50 in May.

Does this contradict the chart? I don’t think so. While the risk preference of investors is rising, the implied volatility is falling. These are two risk measures, but they don’t necessarily measure the same thing. “Risk” is one word we use for many different developments. My guess is that the lower volatility reading reflects that investors are more locked into the current trend and is not a judgment of what that trend is.

The 2011 Buy List Announcement
Posted by Eddy Elfenbein on December 7th, 2010 at 12:21 pm

I’m going to unveil the Buy List for 2011 next Friday, December 17.

The new Buy List will go into effect at the start of trading on Monday, January 3, 2011.

I make each Buy List publicly known about two weeks before the end of the year so no one can claim that I fudge the numbers or front-run the stocks.

As usual, once the Buy List is set, I can’t make any changes for the entire year.

I plan to add and delete five stocks which is just one-quarter of the portfolio.

S&P 500 Breaks 1,230
Posted by Eddy Elfenbein on December 7th, 2010 at 10:48 am

Wall Street seems to like the tax deal, or at least stocks are rallying after that specific news has come out. The media loves to say that the market did X in response to event Z, but we can never be sure that Z was the cause of X.

The S&P 500 broke 1,235 this morning which is its highest intra-day point in over two years. The market, however, has backed up some since then. Several of our Buy List stocks are doing well. Fiserv (FISV) is at a new 52-week high. Becton Dickinson (BDX) is inches from a new high. Moog (MOG-A) also hit a new high this morning.

Interestingly, gold plunged $20 per ounce within a few minutes this morning.

The CEO of Bank of America (BAC) said that the bank plans to raise its dividend next year. He said they’ll target 30% of earnings which will probably be 40 cents per year, or 10 cents per share per quarter.

The old quarterly dividend got as high as 64 cents per share before it was slashed to just one penny per share.

StockTwits Announces Partnership with Yahoo!
Posted by Eddy Elfenbein on December 7th, 2010 at 10:18 am

StockTwits has announced a deal with Yahoo to add Market Pulse to YahooFinance.

Here’s how Howard Lindzon describes it:

StockTwits is pleased to announce that we are a content partner with Yahoo! Finance and that our microblog messages will be featured prominently on the Market Pulse pages across the universe of US equites and ETF’s to be seen by millions of Yahoo Finance users across the globe. Today, Yahoo! Finance launches a new and wonderful feature called Market Pulse that captures real time stock market conversations focused on specific tickers.

We are very excited that Yahoo Finance has chosen to use our API, which acknowledges the hard work we have done over the years curating ideas and people $YHOO Finance users can click on your Stocktwits name and avatar and will be linked right to your profile page, so take some pride .

Our pal Josh has my favorite explanation of the whole end results and possibilities.

The full experience of Stocktwits is still on our web site and desktop where you can see all the messages from Stocktwits and the messages we pull from Twitter with the proper tagging.

We earned this one with a great product, but it still took a few years of hustle, cajoling, begging, travelling etc…to push this partnership over the goal line. Yahoo made us work hard for it. Yahoo! Finance has done a beautiful job of laying out these pages which you can find by clicking on the Market Pulse link in the navigation column of Yahoo! Finance ticker pages.

This partnership creates an incredible opportunity for our community members to share their ideas and build a bigger audience for themselves. There will be thousands of new voices contributing and sharing ideas and it will be fun watching the growth of our community accelerate further.

NOTE – Be sure to send your messages over the StockTwits platform, because only those are being picked up by Market Pulse. This includes The StockTwits website, the StockTwits Desktop (http://stocktwits.com/desktop) and StockTwits mobile apps.

See you on the stream!

Morning News: December 7, 2010
Posted by Eddy Elfenbein on December 7th, 2010 at 7:31 am

Treasury Plans to Sell Remaining Citigroup Stake

Fed Emails Are Sought

Tweeting Rules May Leave Brokers With Little to Say to Clients

China Rate Rise Talk Builds as Loans and Inflation Rise

Markets Edgy After EU Makes No New Move on Debt Crisis

European Central Bank’s Stark Resists More Bond Buys, Against “E-bond”

BUY OR SELL-Is Silver Sustainable at $30 an Ounce?

Oil Rises to 26-Month High Above $90 on U.S. Supply Forecast

Citigroup Stake Sale Nets $12 Billion Profit for US

Google Opens E-book Store in Challenge to Amazon

Selgin on the Fed

The Data Made Me Do It!

The Tax Cut Deal
Posted by Eddy Elfenbein on December 6th, 2010 at 9:51 pm

President Obama and Congressional Republicans have reached a tentative deal to extend President Bush’s tax cuts for two more years. President Obama had wanted to extend the tax cuts, which are due to expire at the end of the year, to everyone except those who make over $250,000 (or $200,000 for individuals). The GOP wanted to extend President Bush’s tax cuts for everyone.

On Saturday, the Senate took two votes to extend the tax cuts for everyone except the wealthy. The first was for President Obama’s plan, and that vote was 53-37—a majority but not enough to shut off debate. The second vote, which the White House opposed, was to extend the tax cuts for everyone except for folks who make more than $1 million. That vote was 53-36. Again, it was a majority but not enough to shut off cloture.

That sent Congress and the president to the negotiating table. The deal calls for the entire Bush tax cuts to be extended until 2012. In addition, the Social Security payroll tax will drop from 6.2% to 4.2%. This will only be for next year.

As federal tax rates have fallen in recent years, many Americans find themselves paying more in Social Security taxes than in regular income taxes. As a result, this payroll tax holiday will have a broad impact. Under current law, Social Security will be taxed next year at 6.2% on your first $106,800.

The deal calls for a 13-month extension in unemployment insurance. The estate tax will also rise to 35% on everything after the first $5 million.

So far, Republicans seem much happier with the deal than Democrats. Paul Krugman wrote, “the only way to cut spending enough to pay for the Bush tax cuts in the long run would be to dismantle large parts of Social Security and Medicare.”

The most important part for investors is that the tax rate for long-term capital gains and dividends will stay at 15%.

Leucadia National To Pay Dividend
Posted by Eddy Elfenbein on December 6th, 2010 at 6:30 pm

After a three-year hiatus, Leucadia National (LUK) will return to the ranks of dividend payers.

The company just announced that it will pay a dividend of 25 cents per share, “payable on December 30, 2010 to record holders of Leucadia common shares on December 17, 2010.”

The company had paid year-end dividends of 25 cents per share in 2006 and 2007, but it hasn’t paid anything since.

Mad Men on the Brain
Posted by Eddy Elfenbein on December 6th, 2010 at 3:23 pm

From a newspaper in the greater New York area:

Because of an editing error, the Evening Hours column last Sunday misidentified a guest shown with Jon Corzine at Richard LeFrak’s 65th birthday party. He is Lloyd Blankfein, not Lloyd Blankenship.

(HT: Felix)

What’s In the CYC?
Posted by Eddy Elfenbein on December 6th, 2010 at 12:56 pm

The S&P 500 is trading in a tight range today just below Friday’s close of 1,224.71. That was the highest close since November 5th when the S&P 500 finished at 1,225.85 which was the highest close in 26 months.

The Morgan Stanley Cyclical Index (^CYC) did indeed close above 1,000 on Friday. The CYC finished the week at 1,000.95 which was its highest close since May 20, 2008.

In today’s trading, the cyclicals are again leading the market. Stocks like Freeport-McMoRan Copper & Gold (FCX), ConocoPhillips (COP), Baker Hughes (BHI), Caterpillar (CAT), Occidental Petroleum (OXY) are at or near 52-week highs today.

Since I make so much reference to the CYC, here’s a look at the 30 stocks in the index:

Ben Bernanke on “60 Minutes”
Posted by Eddy Elfenbein on December 6th, 2010 at 11:35 am

I continue to be a big fan of Ben Bernanke. I’ll grant you that he doesn’t have the most commanding screen presence, but he’s very smart and he can explain things clearly.

The problem with being the Fed Chairman is that every syllable you utter is dissected beyond reason. Bernanke’s “100% answer” (7:36) is getting a great deal of attention today. I recommend downplaying that and instead listening to the overall substance of what he’s saying.