• The 2012 Crossing Wall Street Buy List
    Posted by on December 15th, 2011 at 5:24 am

    *Drumroll please*

    Ladies and gentlemen, the following 20 stocks are my Buy List for 2012:

    AFLAC ($AFL)

    Bed, Bath & Beyond ($BBBY)

    CR Bard ($BCR)

    CA Technologies ($CA)

    DirecTV ($DTV)

    Fiserv ($FISV)

    Ford ($F)

    Harris ($HRS)

    Hudson City Bancorp ($HCBK)

    Johnson & Johnson ($JNJ)

    Jos. A. Bank Clothiers ($JOSB)

    JPMorgan Chase ($JPM)

    Moog ($MOG-A)

    Medtronic ($MDT)

    Nicholas Financial ($NICK)

    Oracle ($ORCL)

    Reynolds American ($RAI)

    Stryker ($SYK)

    Sysco ($SYY)

    Wright Express ($WXS)

    Fifteen of the 20 stocks from 2011 remain. The five new stocks are CR Bard ($BCR), CA Technologies ($CA), DirecTV ($DTV), Harris ($HRS) and Hudson City Bancorp ($HCBK). I’ll write more on the new stocks in the days to come.

    The five stocks I’m deleting are Abbott Laboratories ($ABT), Becton, Dickinson ($BDX), Deluxe ($DLX), Gilead Sciences ($GILD) and Leucadia National ($LUK).

    These changes don’t mean I think the old stocks are about to collapse. I simply believe the new stocks are better opportunities.

    The new Buy List goes into effect at the start of trading on Tuesday, January 3rd, 2012 which is the first trading day of the new year. As usual, the list is locked and I won’t be able to make any changes for the entire year.

    I will track the Buy List as if it is a $1 million portfolio with 20 equally-weighted positions of $50,000 each based on the closing price on December 30, 2011.

  • Morning News: December 15, 2011
    Posted by on December 15th, 2011 at 5:18 am

    Euro Remains Under Pressure As Markets Shun Risk

    Merkel Mired by Woes That May Deter Crisis Effort

    Euro Zone Deal Runs Into Second Thoughts

    Poland Skirts Euro Zone Woes, for Now

    Bernanke: Fed Has No Plans to Aid European Banks

    China Imposes New Tariffs on U.S. Vehicles

    OPEC Opts to Increase Its Level of Output

    Gold Extends Fall In Asia, Near-Term Outlook Weak

    Traders Confounded as Volatility Extends Run

    Mortgage Bonds Rally as Fed Backstop Seen in QE3

    Chevron’s Crude-Oil Spill in Brazil Prompts $10.6 Billion Lawsuit

    Lines Drawn on Antipiracy Bills

    Victoria’s Secret Revealed in African Child Labor

    SurveyMonkey Valued at $1 Billion as TPG Joins as Investor

    Stone Street: ZAGG + iFrogz: The $100 Million Acquisition Barely Worth Mentioning

    Joshua Brown: The Ten Biggest Market Moments of 2011

    Be sure to follow me on Twitter.

  • Buy List Update
    Posted by on December 14th, 2011 at 5:00 pm

    Our 2011 Buy List currently holds a small lead over the S&P 500. As of today’s close, the Buy List is down 1.96% for the year while the S&P 500 is down 3.64% for the year.

    This is our biggest lead over the index since July 15th. These figures don’t include dividends but that probably erases about 40 basis points off our lead.

    There are now just 11 trading days remaining in 2011. If this holds up, 2011 will be our fifth-straight year of beating the S&P 500.

  • Morning News: December 14, 2011
    Posted by on December 14th, 2011 at 5:12 am

    Euro Crisis Shows Dutch Converge With Germany

    European Commission Chief Assails Britain Over Treaty Veto

    Italy Bond Costs Set to Mark New Record at Auction

    China Easing Case Grows on ‘Grim’ Outlook, Money Supply

    A Delisting for Olympus Puts Japan in a Debate

    OPEC Discusses 30 Million-Barrel Ceiling

    Fed Takes No Action, Citing Signs of Moderate Growth

    Bernanke Signals Fed Ready to Ease on EU Risk

    Stocks, Copper Fall as Fed Avoids Stimulus

    Wall St.’s Odd Couple and Their Quest to Unlock Riches

    Bears Hungry for More Tech Shares

    PayPal Bets on 103 Million Users to Target Groupon

    MF’s Corzine Said to Know of Customer Fund Misuse

    Goldman Loses Partners in Weakest Year Since 2008

    Avon to Seek New CEO, Separating Top Roles With Jung Remaining as Chairman

    Roger Nusbaum: Portfolio Expectations

    Paul Kedrosky: US Tax Rates in Three Graphs. Not Boring. Really.

    Be sure to follow me on Twitter.

  • Today’s Fed Statement
    Posted by on December 13th, 2011 at 2:44 pm

    Snore.

    Information received since the Federal Open Market Committee met in November suggests that the economy has been expanding moderately, notwithstanding some apparent slowing in global growth. While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but business fixed investment appears to be increasing less rapidly and the housing sector remains depressed. Inflation has moderated since earlier in the year, and longer-term inflation expectations have remained stable.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

    To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

    The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

    The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Charles L. Evans, who supported additional policy accommodation at this time.

    The only thing here that’s marginally noteworthy is that the Fed nearly admits that it can’t do much about high unemployment despite being part of its dual mandate.

  • An Equity Premium Quandry
    Posted by on December 13th, 2011 at 12:47 pm

    Here’s something I’ve been thinking about and I’m honestly not sure if it leads anywhere.

    Below is a chart I made at the St. Louis Fed’s FRED site. The blue line shows the Wilshire 5000 total return index dividend by the AA Corporate Bond total return index. In other words, it’s how much better stocks are doing than the long-term bond market.

    The red line is short-term interest rates. For this, I chose the 1-month AA non-financial rate. Note that this is a rate, not an index.

    Perhaps this relationship is illusionary but I’m curious if the relationship between long-term rates and equities is itself dependent on short-term rates.

    I also think it’s interesting that financially speaking, the 2000-2001 recession last for a much longer time than the gray bar suggests. The later recession, however, lasted roughly as long. In both cases, the market saw the recession before it officially started.

  • Morning News: December 13, 2011
    Posted by on December 13th, 2011 at 5:31 am

    EU Banks Selling ‘Crown Jewels’ for Cash

    Cameron’s Backers Look Past ‘History of Antipathy’

    U.K. Inflation Slows on Food, Transport Costs

    Pondering a Dire Day: Leaving the Euro

    Gold Falls to 7-Week Low on Europe Anxiety

    China’s 150 Million Electric Bikes Bolstering Lead

    Rating Agency Warnings Bring Down the Markets

    Bernanke’s Legacy at Fed: Still a Lagging Indicator

    Intel Sees Opportunity in Shortage of Drives

    Jive Software Raises $161.3 Million in IPO After Pricing Above Its Range

    Sony Shopping is ‘Wrong Direction’ in Apple War

    WaMu Ex-Officials Settle FDIC Lawsuit

    U.S. Judge Grants Delay in Challenge to AT&T Deal

    Google Acquisition of Motorola Delayed in Europe

    No Hit Toy to Brighten Retailers’ Christmas

    Jeff Carter: Do You Fund Start Ups or Store Fronts?

    Cullen Roche: The Role of The Entrepreneur in a Capitalist Economy

    Be sure to follow me on Twitter.

  • Where Do Profits Come From?
    Posted by on December 12th, 2011 at 3:31 pm

    I was listening to today’s EconTalk podcast with Russ Robert and he was talking with Mike Munger about the source of profits. Munger made a good point that profits aren’t about exploitation; they’re really about correcting errors:

    I think it is important, and the reason I wanted to start with that, as you pointed out, hilarious joke, that we need to recognize what the source of profits are. The source of profits is correcting errors. The economy around us is full of errors. And what I mean by errors is a maladjustment, a divergence between what we are actually producing and what we “should” produce in order to use the stuff that we have–our mental resources, physical capital, labor–to produce the highest possible level of satisfaction of what the public wants. So, there’s this unobservable thing that nobody knows and nobody can know, and that is: What is it that a consumer-sovereignty oriented society would produce? How are we going to allocate our resources? There’s all sorts of mistakes in the way we are allocating resources. If we not making iPods, if we are not making things that people want to buy, even if they don’t know that they want to buy it. The genius of Steve Jobs was to say: Here’s the way people want to buy these things. They don’t know it, but if we do it, we correct this mistake.

  • Tim Tebow’s Pass Plays
    Posted by on December 12th, 2011 at 3:07 pm

    I’m not sure if there’s a market lesson here, but here’s a look at all of Tim Tebow’s pass plays from yesterday.

    During the second and third quarters, Tebow failed to complete a single pass in nine attempts. Yet in the fourth quarter and overtime, he was amazingly accurate. At one point, he completed ten straight passes.

    For his first 16 passes (the fist 48 minutes of the game), Tebow had a passer rating of 13.5. For his last 24, he had a rating of 111.6.

    First Quarter
    2nd-13, DEN12 10:26 T. Tebow passed to L. Ball to the left for 10 yard gain
    3rd-3, DEN22 9:57 T. Tebow incomplete pass to the right
    2nd-9, DEN10 6:03 T. Tebow passed to D. Thomas to the left for 12 yard gain
    2nd-11, DEN21 4:49 T. Tebow incomplete pass to the left
    3rd-16, DEN16 4:42 T. Tebow passed to M. Willis to the left for 23 yard gain
    2nd-6, CHI39 2:44 T. Tebow incomplete pass to the right
    3rd-6, CHI39 2:26 C. Tillman intercepted T. Tebow for no gain

    Second Quarter
    1st-10, CHI15 8:15 T. Tebow incomplete pass to the left
    3rd-6, CHI11 7:31 T. Tebow incomplete pass to the left
    1st-10, DEN42 5:44 T. Tebow incomplete pass to the right
    1st-10, DEN33 0:29 T. Tebow incomplete pass to the right
    2nd-10, DEN33 0:25 T. Tebow incomplete pass to the right
    1st-10, DEN47 0:00 T. Tebow incomplete pass down the middle

    Third Quarter
    2nd-10, DEN45 13:11 T. Tebow incomplete pass down the middle
    3rd-10, DEN45 13:05 T. Tebow incomplete pass to the left
    1st-10, DEN20 5:19 T. Tebow incomplete pass to the right

    Fourth Quarter
    1st-20, DEN27 11:12 T. Tebow passed to D. Thomas to the left for 14 yard gain
    2nd-6, DEN41 10:34 T. Tebow passed to D. Thomas to the left for 9 yard gain
    1st-10, 50 10:05 T. Tebow passed to M. Willis to the left for 14 yard gain
    1st-10, DEN7 6:50 T. Tebow passed to E. Decker to the left for 23 yard gain
    1st-10, DEN30 6:22 T. Tebow incomplete pass to the left
    2nd-10, DEN30 6:18 T. Tebow incomplete pass to the right
    3rd-10, DEN30 6:12 T. Tebow passed to E. Decker to the right for 1 yard gain
    1st-10, DEN37 4:34 T. Tebow passed to L. Ball to the right for 6 yard gain
    2nd-4, DEN43 4:05 T. Tebow passed to L. Ball to the right for 10 yard gain
    1st-10, CHI47 3:42 T. Tebow passed to J. Johnson down the middle for 8 yard gain
    2nd-2, CHI39 3:17 T. Tebow passed to J. Johnson to the left for 3 yard gain
    1st-10, CHI36 3:11 T. Tebow passed to M. Willis down the middle for 19 yard gain
    1st-10, CHI17 2:39 T. Tebow passed to D. Thomas down the middle for 7 yard gain
    2nd-3, CHI10 2:08 T. Tebow passed to D. Thomas to the right for 10 yard touchdown.
    1st-10, DEN20 0:56 T. Tebow passed to E. Decker to the left for 9 yard gain
    2nd-1, DEN29 0:53 T. Tebow passed to L. Ball to the left for 11 yard gain
    1st-10, DEN40 0:53 T. Tebow incomplete pass down the middle
    2nd-10, DEN40 0:30 T. Tebow passed to M. Willis to the right for 19 yard gain
    1st-10, CHI41 0:23 T. Tebow incomplete pass to the right
    2nd-10, CHI41 0:18 T. Tebow incomplete pass to the left

    Overtime
    1st-10, DEN33 12:47 T. Tebow incomplete pass to the left
    2nd-10, DEN34 12:37 T. Tebow passed to W. McGahee to the right for 2 yard gain
    3rd-8, DEN36 12:12 T. Tebow passed to D. Thomas to the right for 10 yard gain
    2nd-12, DEN44 11:15 T. Tebow passed to D. Thomas to the right for 16 yard gain

  • Intel Slides on Lower Guidance
    Posted by on December 12th, 2011 at 1:12 pm

    Intel ($INTC) is getting clipped today on news that it’s lowering guidance.

    Intel, a technology bellwether, said it now expected fourth-quarter revenue of $13.4 billion to $14 billion. It had previously forecast revenue of $14.2 billion to $15.2 billion for the holiday quarter.

    Analysts polled by FactSet were expecting revenue of $14.65 billion.

    Intel is the world’s largest maker of microprocessors, the brains of computers. The company said it expected personal computer sales to be up from the previous quarter. But it said computer makers are reducing inventories and microprocessor purchases because of hard drive shortages.

    Intel has been a supremely frustrating stock for us because I’ve played it exactly wrong — or perhaps we were too early. Still, I always want to look at our bad calls to see what we can learn.

    I had Intel on last year’s Buy List and it started off as a good position for us. By April, it was an 18% winner for us. The stock then dropped about 25% and recovered to make us a slight gain for the year but it still trailed the overall market.

    After a lot of consideration, I felt that my original thesis no longer held and I decide to boot it from the Buy List for this year. Once again, I was right — at first. Intel underperformed the market at the beginning of this year, then around April it started a large out-performance.

    The stock has beaten earnings pretty consistently for the past few years. I had even considered adding back on for 2012. But I couldn’t help feeling that Intel had over-run its value. Only today, now that 2011 is nearly over, do we see some cracks in the company’s business.

    The lesson for investors is that your thesis can be right but it may take a long time to see it pay off. I remember Peter Lynch saying that his stocks did best in the second or third year that he owned them.