Time Machine
Posted by Eddy Elfenbein on September 20th, 2010 at 11:13 am

Now that an independent body has declared the recession over, let’s take a look at some of the more wrong-headed forecasts:
From March 6, 2009:
Roubini Says Recession May Continue Until End of 2010
Or the absurd fight between Dennis Kneale and bloggers. The fight quickly turned into exactly what Kneale wanted — a publicity stunt — but it originally began when Kneale said the recession had just ended.

Recession Over! (Technically)
Posted by Eddy Elfenbein on September 20th, 2010 at 10:28 am

It’s official, the recession ended in June 2009 according to the National Bureau of Economic Research:

The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months.
In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month. A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.
The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date.

Another Up Monday
Posted by Eddy Elfenbein on September 20th, 2010 at 10:02 am

Happiness reigns again on Wall Street, at least for now. The averages are modestly higher although we’re still below the Iron Curtain of 1130. I’m not a big fan of technical analysis but I do concede that markets often seem to act with undue deference towards “resistance points.” That’s happening again as the S&P 500 has tried and repeatedly failed to stay over 1130 for very long. But if this is going to be our fourth straight week of gains, then we’re off to a good start.
The big news this week will be tomorrow’s Fed meeting. I don’t expect any change in rates—meaning, if we had something like interest rates. However, I’ll be curious if there’s any real change in the Fed’s policy statement.
The other news item that I’ll be watching closely is the earnings report from Bed Bath & Beyond (BBBY). This is due to come on Wednesday. Here’s my latest take on BBBY’s earnings report.
Finally, here’s a look at the S&P 500 along with the earnings:

The implication is that the market is cheap IF the earnings scenario holds. The future earnings projections isn’t from me — that’s Wall Street’s consensus via S&P.

Morning News: September 20, 2010
Posted by Eddy Elfenbein on September 20th, 2010 at 9:42 am

Egged on by Hedge Funds, Oliver Stone Turns on Goldman Sachs
Wall Street’s Profit Engines Slow Down
Nissan to Double China Capacity
Bond Markets Get Riskier
Verizon Names President, COO
Lennar Reports Profit as Cost Cuts Contribute to Wider Home-Sale Margins
OIL FUTURES: Crude Nudges Higher, But Volumes Are Thin
Pocket money ‘Cut for Youngsters’

Oracle Hits Nine-Year High
Posted by Eddy Elfenbein on September 17th, 2010 at 2:21 pm

Wow, Mark Hurd hasn’t been on the job very long and Oracle (ORCL) is already doing well. The company just reported very strong results. The stock is now over $27 which is a nine-year high.

Oracle reported a net income of $1.35 billion, or 27 cents a share, compared with a profit of $1.12 billion, or 22 cents a share, for the year-earlier period. Revenue rose 48% to 7.5 billion. Adjusted income was 42 cents a share.
Analysts had expected the company to report adjusted earnings of 36 cents a share on revenue of $7.3 billion, according to a consensus survey by FactSet Research.
Oracle has been widely expected to benefit from rising corporate spending on information technology. But Oracle Co-President Safra Catz said in a call with analysts that “what’s really going on is we have a lot of company-specific momentum in each line of business.”

The stock is up 11% since Hurd came on board 11 days ago.

Morning News: September 17, 2010
Posted by Eddy Elfenbein on September 17th, 2010 at 9:02 am

London Hotel Revenue Returns to 2008 Level on Business Travel
US STOCKS-Futures Rise After Strong Tech Earnings
Cheapest Stocks Fail to Lure Investors as Bullish Signs Mount
U.S. to Sell G.M. Stake Over Time
Johnson & Johnson Aims to Buy Vaccine Maker Crucell
Senate Approves Small Business Bill
Apple Said to Negotiate With Publishers Over Digital Newsstand
FedEx Delivers Int’l Profits but Cuts US Jobs

Department of No Duh!
Posted by Eddy Elfenbein on September 16th, 2010 at 2:06 pm

Academic study:

Young, male, testosterone-fuelled CEOs more likely to start or drop deals: UBC study
Too much testosterone can be a deal breaker, according to Sauder School of Business researchers at the University of British Columbia. Their paper, to be published in the INFORMS journal Management Science on September 10, shows that young CEOs with more of the steroidal hormone in their system are more likely to initiate, scrap or resist mergers and acquisitions.
The study by Sauder Finance Professors Maurice Levi and Kai Li, and PhD student Feng Zhang, titled “Deal or No Deal: Hormones and the Mergers and Acquisitions Game,” shows that testosterone – a hormone associated with male dominance-seeking in competitive situations – can be a negative factor in high-stakes decision-making.
“We find a strong association between male CEOs being young and their withdrawal rate of initiated mergers and acquisition,” says Prof. Levi, whose research relies on the established correlation between relative youth and increased levels of testosterone.

(HT: Dealbreaker)

S&P 500 Breaks 200DMA
Posted by Eddy Elfenbein on September 16th, 2010 at 1:45 pm

The S&P 500 recently broke above its 200DMA. Here’s a look:

Last year I looked at the evidence of how well the indicator has worked:

So does the 200DMA work? The evidence suggests that it’s a pretty good indicator of future price performance. When the S&P 500 has been below the 200DMA, it’s dropped a total of about 20% over the equivalent of 27 years. In other words, the S&P 500 has been below its 200DMA about one-third of the time.
Historically, the best time to invest has been when the S&P is less than 1.7% below the 200DMA.
When the index is above the 200DMA, well, then everything looks much brighter. All of the market’s gain (and then some) have happened when we’re above the 200DMA which occurs about two-thirds of the time.

Although we’re above the 200DMA, the S&P 500 runs into a brick wall around 1227. I’ve mentioned the 1020/1130 trading range before, but it’s really making a strong stand.

Phil Maymin On the Nature of Genius
Posted by Eddy Elfenbein on September 16th, 2010 at 12:44 pm

11 Stocks to Short from Tim Sykes
Posted by Eddy Elfenbein on September 16th, 2010 at 12:26 pm

Timothy Sykes is an investor who follows questionable stocks that pump up their share prices with a blizzard of press releases. When the time is right, Timmy goes in and shorts them for fun and profit.
Here’s his latest list of short candidates:

Go Solar USA (GSLO)
RXi Pharmaceuticals (RXII)
RadNet (RDNT)
Liquidmetal Technologies (LQMT)
Texas Pacific Land Trust (TPL)
Vringo (VRNG)
Revolutions Medical (RMCP)
CrowdGather (CRWG)
Kraig Biocraft Laboratories (KBLB)
China Sun Group High Tech (CSGH)
Sunvalley Solar (SSOL)

Tim titled the post “10 Good Small Cap Stocks To Buy & Short Sell” although I counted 11. Be sure to read his comments because he doesn’t suggest shorting them all immediately.