The market was higher in early trading, but unlike most recent sessions we have seen the early gains reversed and as of this post the major indexes are trading in the red. If the day plays out like many before, the market should regain its footing into the close. If not, it would mark a rare change of character for this market.
The big news out of Europe was the latest round of cheap money offered to banks over there via the ECB's LTRO program. This time around more than 800 banks lined up to participate with the ECB lending a total of 530 billion euros. This figure was slightly above estimates and slightly above the first round of LTRO when 489 billion euros were lent.
Hopefully the large liquidity injection will be put to productive use and help the banks shore up their balance sheets. As for the sovereing debt issues in Europe, you can't really solve debt problems with more debt but I do view this as a type of kicking the can down the road scenario. In that sense, it gives the markets more time to price in the fiscal realities and gives the banks more time to reposition their books. So purely as an investor I like the program.
In economic news in the U.S., Q4 GDP was revised higher to +3.0% from a previous estimate of 2.8%. Also, the Chicago PMI came in better than expected at 64.0 vs. 60.2 last month. This continues the streak we have seen of strong readings in the manufacturing sector.
Stocks up on earnings: AH, ITT, COST, FE, CPRT, VRSK
Stocks lower on earnings: SODA, LIZ, JOY, SPLS, FSLR, PANL
Despite the LTRO, the euro is lower this morning and that is weighing on commodities. Gold has staged a big downside reversal so far and its trading down to $1730. Oil prices are also lower near $105.75.
The 10-year yield is getting a bounce near the 2.00% level. And the VIX is only up 2% so far to 18.30.
Trading comment: Today has the makings of a down day for once, but with dip buyers at the ready another positive close wouldn't surprise me either. Materials stocks are down the most today, while defensive consumer staples are bucking the weakness so far. Lots of stocks look extended on their charts, so a pullback or at least some consolidation would be constructive to allow these stocks time to trade sideways and build another base. It's hard to see the current pace of advance in the market continuing without a breather.
KAM Advisors was long FE, SODA
29 Şubat 2012 Çarşamba
28 Şubat 2012 Salı
Consumer Confidence vs. The Bond Market
The market is higher again in early trading. Pullbacks continue to be brief affairs and the stock market mocks those calling for an imminent correction.
The strongest piece of economic data today was the Conference Board's Consumer Confidence index which spiked to 70.8 in February from 61.5 last month. That's a big jump and we also saw a rise in the Univ. of Mich consumer confidence index earlier in the month.
So it's safe to say that consumers are becoming more upbeat about the economy. We know from the relentless rise in the stock market that investors are becoming more upbeat about the market as well. But what doesn't translate is what is eating at bond investors?
The 10-year yield continues to drift lower, now back down to 1.90%. If the bond market were even a tad more upbeat about the economy and global markets, I would expect the 10-year to have already reached 2.5-3.0% levels.
Some would argue that the Fed is skewing this indicator with their operation twist buying. But this is a very deep market, and the Fed can only effect things at the margin. They can't fully absorb a global selloff in Treasuries, if and when we ever get one. In the meantime, the 10-year yield remains an outlier in terms of improving sentiment indicators.
The rebound in the housing market hasn't shown up yet in the Case-Schiller figures. This index fell another -4.0% in December, even though its data lags a bit. We will have to see if the index picks up as it starts showing 2012 figures.
On the earnings front, I see more stocks gapping higher on positive reactions to earnings. The poster child today will be Priceline (PCLN), but also take a look at SINA, DPZ, and AZO to name a few. On the disappointing reaction side are SWN, TECD, and FDP.
Commodities are mixed so far. Oil prices are a bit lower near $108, while gold prices are higher to $1785 and copper and silver prices are up even more (on a percentage basis).
The VIX is flattish around the 18.15 level.
Trading comment: Yesterday we trimmed our longs in SODA, but the stock continues higher today. Google (GOOG) is also moving back above its 50-day average, which is a good sign. Tech stocks are leading the early action while defensive utilities (last year's winners) continue to lag. With the markets up as much as they are since the October lows, I would expect to see some larger increases in bullish sentiment in the advisor surveys, but we haven't seen the extreme readings yet. Maybe this week will begin to show more bullishness.
KAM Advisors was long GOOG, PCLN, SODA
The strongest piece of economic data today was the Conference Board's Consumer Confidence index which spiked to 70.8 in February from 61.5 last month. That's a big jump and we also saw a rise in the Univ. of Mich consumer confidence index earlier in the month.
So it's safe to say that consumers are becoming more upbeat about the economy. We know from the relentless rise in the stock market that investors are becoming more upbeat about the market as well. But what doesn't translate is what is eating at bond investors?
The 10-year yield continues to drift lower, now back down to 1.90%. If the bond market were even a tad more upbeat about the economy and global markets, I would expect the 10-year to have already reached 2.5-3.0% levels.
Some would argue that the Fed is skewing this indicator with their operation twist buying. But this is a very deep market, and the Fed can only effect things at the margin. They can't fully absorb a global selloff in Treasuries, if and when we ever get one. In the meantime, the 10-year yield remains an outlier in terms of improving sentiment indicators.
The rebound in the housing market hasn't shown up yet in the Case-Schiller figures. This index fell another -4.0% in December, even though its data lags a bit. We will have to see if the index picks up as it starts showing 2012 figures.
On the earnings front, I see more stocks gapping higher on positive reactions to earnings. The poster child today will be Priceline (PCLN), but also take a look at SINA, DPZ, and AZO to name a few. On the disappointing reaction side are SWN, TECD, and FDP.
Commodities are mixed so far. Oil prices are a bit lower near $108, while gold prices are higher to $1785 and copper and silver prices are up even more (on a percentage basis).
The VIX is flattish around the 18.15 level.
Trading comment: Yesterday we trimmed our longs in SODA, but the stock continues higher today. Google (GOOG) is also moving back above its 50-day average, which is a good sign. Tech stocks are leading the early action while defensive utilities (last year's winners) continue to lag. With the markets up as much as they are since the October lows, I would expect to see some larger increases in bullish sentiment in the advisor surveys, but we haven't seen the extreme readings yet. Maybe this week will begin to show more bullishness.
KAM Advisors was long GOOG, PCLN, SODA
27 Şubat 2012 Pazartesi
Frenzy of Friends
My new visiting friend, Adam, left yesterday, and I’m hanging out with Shug, the dog, on the last day of this house-sit—a good time to blog.
Unlike my usual quiet Moab winters, this one’s been chock full of projects and surprises like visits from intriguing people from near and distant lands.
Bad News and Good News
The bad news is our Moab City Council flip-flopped and voted against the Resolution declaring "corporations are not people" that I talked about in the last post. It looks like we’re going work to put it on the ballot so the people rather than the council members can decide, which is better anyway.
The good news is that I have gotten visits from amazing people this whole past month. My first visit was from Benjamin, from France, and his two friends Yasmin and Marisa, from Mexico, all traveling without money.
Forward the (R)evolution Friends
Some of you might be familiar with the Forward the (R)evolution moneyless voyagers. I've been in contact with them for the past three years. They began as three Europeans (Benjamin from France, Raphael from Germany, and Nicola from Italy) who hitched, without money (except for border-crossing fees), by boat from Europe to the Canary Islands to Brazil (where Nicola returned to Europe), then overland to Columbia, by boat to Panama, overland to Mexico (where Raphael’s and Benjamin’s girlfriends, Nieves and Camille, joined them from Europe). Raphael , Nieves, and Camille later returned to Europe from Mexico while, to my joy, Benjamin continued northward via California to Moab, joined by two friends from Mexico, Yazmin and Marisa.
Benjamin, in his mid 20s, is the first human in the flesh I’ve ever met who is committed to living completely without money, having gone three years moneyless, so far. I felt child-like joy meeting him, like I had reunited with a long-lost soul-mate. And his friends, Yazmin from Puebla and Marisa from Chihuahua, impressed me to no end, having the courage to leave Mexico, using nearly no money, on an odyssey across the US. All three were a pure pleasure to be with, like I had known them all my life. I got to oil my rusty Spanish, too.
Marisa is making a documentary of this incredible journey. I tried to embed the teaser video of her work thus far, but it's not working. So you'll have to watch it at Forward the (R)evolution.
My friend Bruni (whom I house-sit for) gladly offered to host them at her house for a couple days, to freshen up, before they stayed with me in a big “guest” cave for several days. We ate scavenged food, played music around the fire, played their home-made replica of the Settlers of Catan game, hiked, philosophized, and hung out with my Moab friends.
They continued east, planning to go to Boulder, Colorado, then to Taos and Santa Fe, New Mexico, and Austin, Texas. Marisa planned to then head to New York and Benjamin and Yazmin back to Mexico. Benjamin wants to hitch a boat back to Europe from there.
Meanwhile, Raphael and Nieves are back in Germany, gaining notoriety living virtually moneyless with their new baby (see Spanish article Viven Sin Dinero in lanacion.com).
Adam
After all those friends left Moab, another mellow and loveable dread-locked visitor, Adam, showed up from Virginia. He was also heading to the wilderness school in Montana and decided to first come to Moab. He stayed with me mostly at this latest house-sit. But we took Shug, the dog I’m caring for, up to the little cave and stayed up there a couple nights, relishing the luxury of the canyon. Last Saturday night, Adam and I went to the Trashion Show at Frankie D’s and danced to Techno with lots of Moab friends and had the time of our lives. I said my sad goodbyes to Adam yesterday morning as he hitched out of Moab.
<><>
Film-makers
Here’s part of the itinerary, in case anybody out there wants to come:
The Man Who Quit Money Book Reading/Signing/Discussion Itinerary, so far:
Wednesday, March 14, 7:00 pm
Saturday, March 17, 6:30 pm
Monday, March 19, 7:00 pm
Grand County Public Library
257 East Center Street, Moab, UT 84532
View Map · Get Directions
Unlike my usual quiet Moab winters, this one’s been chock full of projects and surprises like visits from intriguing people from near and distant lands.
Bad News and Good News
The bad news is our Moab City Council flip-flopped and voted against the Resolution declaring "corporations are not people" that I talked about in the last post. It looks like we’re going work to put it on the ballot so the people rather than the council members can decide, which is better anyway.
The good news is that I have gotten visits from amazing people this whole past month. My first visit was from Benjamin, from France, and his two friends Yasmin and Marisa, from Mexico, all traveling without money.
Forward the (R)evolution Friends
 |
| Benjamin, Michael (an English chap I've never met), and Yazmin, in Mexico before I met them in person. |
Benjamin, in his mid 20s, is the first human in the flesh I’ve ever met who is committed to living completely without money, having gone three years moneyless, so far. I felt child-like joy meeting him, like I had reunited with a long-lost soul-mate. And his friends, Yazmin from Puebla and Marisa from Chihuahua, impressed me to no end, having the courage to leave Mexico, using nearly no money, on an odyssey across the US. All three were a pure pleasure to be with, like I had known them all my life. I got to oil my rusty Spanish, too.
 |
| Marisa (in Mexico?) before I met her |
Marisa is making a documentary of this incredible journey. I tried to embed the teaser video of her work thus far, but it's not working. So you'll have to watch it at Forward the (R)evolution.
My friend Bruni (whom I house-sit for) gladly offered to host them at her house for a couple days, to freshen up, before they stayed with me in a big “guest” cave for several days. We ate scavenged food, played music around the fire, played their home-made replica of the Settlers of Catan game, hiked, philosophized, and hung out with my Moab friends.
 | ||
| Benjamin, Yazmin, Suelo (Not sure where Marisa is) Glenn took this pic at the 'Guest Cave' |
 |
| The 'Guest Cave' (Glenn took this pic) |
Meanwhile, Raphael and Nieves are back in Germany, gaining notoriety living virtually moneyless with their new baby (see Spanish article Viven Sin Dinero in lanacion.com).
Glen
While my three friends and I were in the big cave, a dude named Glen showed up, saying he decided to swing through the Moab area to see if he could find me. I had been house-sitting most the winter, so this was magical synchronicity. Glen writes an excellent blog, The Practical Primitivist, and had just finished a wilderness course in Montana and was on his way to another one near Phoenix. I found his wisdom profound and I learned invaluable things from him. |
| Adam in the cave in the morning |
Adam
After all those friends left Moab, another mellow and loveable dread-locked visitor, Adam, showed up from Virginia. He was also heading to the wilderness school in Montana and decided to first come to Moab. He stayed with me mostly at this latest house-sit. But we took Shug, the dog I’m caring for, up to the little cave and stayed up there a couple nights, relishing the luxury of the canyon. Last Saturday night, Adam and I went to the Trashion Show at Frankie D’s and danced to Techno with lots of Moab friends and had the time of our lives. I said my sad goodbyes to Adam yesterday morning as he hitched out of Moab.
 |
| Rocket-stove cooking outside the cave (Adam took this pic) |
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 |
| Juniper tea. I also drink teas from Pinion, wild grasses, and Mormon Tea as a daily staple. (Adam took this pic) |
Film-makers
While Adam had been here, a film team from MAHA Productions, based in Europe, showed up and filmed me and my friends Sallie and Helena for a documentary called Backroads USA, about off-the-beaten-path characters across the USA. I usually don’t like that sort of thing, but they were so personable and wonderful, like old friends, that I loved working with them. They took us to dinner afterward, along with another chap they had filmed, named Lou, and fun was had by all.
Bracing myself for what’s next
The coming weeks call for an even stranger and new life for me, and I pray I can walk it with grace, with equanimity. Mark Sundeen is taking me with him on part of the book signing for The Man Who Quit Money. Funny, I didn't plan or decide for any of this book stuff to happen. But that's the nature of this lifestyle, letting unfold what may, and things more magical happen than I could ever plan, much less conceive.Here’s part of the itinerary, in case anybody out there wants to come:
Wednesday, March 14, 7:00 pm
Saturday, March 17, 6:30 pm
Monday, March 19, 7:00 pm
Grand County Public Library
257 East Center Street, Moab, UT 84532
View Map · Get Directions
1818 N. Vermont Ave., Los Angeles, CA 90027
Thursday, March 22, 7:00 pm
904 Manhattan Avenue, Manhattan Beach, CA 90266
More events may be added to this itinerary
Moving comments
I'm going to move comments to the website for the time being. Troll spam is really starting to degrade the blog so I'm going to give it a breather for a while.
Monday Morning Musings
Last week I called this market the Groundhog Day market, and this morning that notion is repeating itself again. Go figure.
The market was lower in early trading, but dip buyers have quickly stepped in and the major indexes are already back in positive territory. As we near month-end, I sense performance anxiety setting in. And I would expect it to become more pronounced as we get closer to quarter-end.
In economic news this morning, pending home sales for January increased 2.0%, above expectations. The homebuilding stocks are reacting positive to the news, as well as positive comments from Warren Buffett about the housing market.
Asian markets were mostly lower overnight, and Europe is lower this morning. G-20 officials met over the weekend, and indicated that additional financial safeguards are needed in Europe before additional funds are made available from the IMF.
Stocks rising after reporting earnings: LOW, CTB, and VRX.
Stocks falling after earnings: DNDN, KWK, BRK/B
The euro is lower, with mixed effects on commodities. Gold prices are slightly higher to $1780, and silver and copper prices are higher as well. Oil prices are down a bit, but still high on an absolute level at $108.80.
The 10-year yield is fading further back down to 1.93%; and the VIX is 3% higher to 17.80.
Trading comment: I haven't seen any definitive news, but the positive reaction in ESRX and MHS this morning hints that the FTC might be looking favorably at the merger. Industrial stocks are leading the early bounce, while defensive utilities are lagging. Priceline (PCLN) reports earnings tonight after the quarter, and the stock is trading at new highs going in. Other stocks trading at new highs today include AAPL, MELI, COH, MA, MNST, and SCSS is very close.
KAM Advisors has long positions in AAPL, COH, ESRX, MA, MELI, MNST, PCLN, and SCSS
The market was lower in early trading, but dip buyers have quickly stepped in and the major indexes are already back in positive territory. As we near month-end, I sense performance anxiety setting in. And I would expect it to become more pronounced as we get closer to quarter-end.
In economic news this morning, pending home sales for January increased 2.0%, above expectations. The homebuilding stocks are reacting positive to the news, as well as positive comments from Warren Buffett about the housing market.
Asian markets were mostly lower overnight, and Europe is lower this morning. G-20 officials met over the weekend, and indicated that additional financial safeguards are needed in Europe before additional funds are made available from the IMF.
Stocks rising after reporting earnings: LOW, CTB, and VRX.
Stocks falling after earnings: DNDN, KWK, BRK/B
The euro is lower, with mixed effects on commodities. Gold prices are slightly higher to $1780, and silver and copper prices are higher as well. Oil prices are down a bit, but still high on an absolute level at $108.80.
The 10-year yield is fading further back down to 1.93%; and the VIX is 3% higher to 17.80.
Trading comment: I haven't seen any definitive news, but the positive reaction in ESRX and MHS this morning hints that the FTC might be looking favorably at the merger. Industrial stocks are leading the early bounce, while defensive utilities are lagging. Priceline (PCLN) reports earnings tonight after the quarter, and the stock is trading at new highs going in. Other stocks trading at new highs today include AAPL, MELI, COH, MA, MNST, and SCSS is very close.
KAM Advisors has long positions in AAPL, COH, ESRX, MA, MELI, MNST, PCLN, and SCSS
25 Şubat 2012 Cumartesi
Mitt Gets the Supply-Side Approach
When former President George W. Bush cut taxes, including his 2003 reduction in tax rates on investment, he always referred to it as putting more money in people’s pockets. I don’t want to be unfair, because the 2003 tax cuts were his best policy move. But Bush was never a supply-sider. Putting more money in people’s pockets is a demand-side argument.
Contrast that with Mitt Romney’s tax-policy speech today at the Detroit Economic Club, where he touted his new across-the board 20 percent reduction in personal tax rates. The language is crucial: “By reducing the tax on the next dollar of income earned by all taxpayers, we will encourage hard work, risk-taking, and productivity by allowing Americans to keep more of what they earn.”
This is supply-side language. It is incentive language.
Many of us have been asking whether Romney understands the incentive model of growth. Namely, keeping more of what you earn, invest, or risk provides a bigger reward. And those rewards translate into a fresh tonic for economic growth.
Ronald Reagan understood this when he famously told people that he quit working as an actor because he only made about 10 cents on the extra dollar earned from the extra movie. Mitt Romney seems to understand this incentive model.
His tax-cut plan is not perfect. Instead of retaining all six brackets of the personal income tax, I wish there were only two brackets or maybe three for a modified flat tax. But it’s clear that Romney understands the incentive value of his 20 percent marginal rate cut. He is satisfactorily answering the question that I and others have posed about his understanding of the supply model.
Reward more and you’ll get more. It’s not just a one-time benefit of more cash. New tax incentives at the margin change economic behavior for the better.
I will have more to say on the Romney plan overall, and about how it contrasts hugely with Obama’s massive tax-rate hikes. But for now I am satisfied that Mitt gets the supply-side approach.
24 Şubat 2012 Cuma
Groundhog Day In The Markets
The markets are slightly higher in early trading. It seems like I am posting the same comments every morning, in a groundhog day like scenario for the markets lately. The major indexes are up a bit, one sector takes over the lead while another takes a breather, a handful of stocks gain on earnings, and a few new breakouts get added to the list. I don't know how long the pattern can continue before something comes out of left field and smacks investors upside the head, but for now we'll continue to focus on what's working and try to maximize profits.
In earnings news, stocks sporting positive reactions: MELI, MNST, AIG, and CRM. MELI was actually down last night after reporting, but by the time the market opened this morning investors were back in a buying mood. Stocks showing declines after reporting include ADSK and NEM to name a couple.
In economic news, the Univ. of Mich consumer sentiment survey improved to 75.3 in Feb. from 72.5 last month. New homes sales came in better than expected at 321,000 units in January, although that figure was slightly below the previous months level.
Asian markets were higher overnight, led by a 1.2% bounce in China. Europe is higher this morning as the concerns surrounding Greece calm a bit.
The euro is also getting a bounce at the expense of the dollar, while commodities are mixed. Oil prices are higher again near $108.15. Copper prices are also higher, but gold prices have eased back near $1775 and silver prices are slightly lower as well.
The 10-year yield is back below the 2.00% level, despite the improving economic data. It is very hard to tell how much of this is the Fed buying bonds to keep a lid on rates. Normally I would have expected the 10-yr to drift higher by now.
The VIX continues to drift lower also, down close to the 16.50 level this morning.
Trading comment: It's very hard to buy stocks that have broken out to new highs or that have gapped higher after reporting strong earnings. But those seem to be the stocks that are leading the market so far this year. One way to get comfortable with this is to buy a half position in stocks breaking out with the idea that you can add to your positions on a pullback. I remember buying a half position in JDSU in 1999 and it turned out to be one of my best trades ever. I'm not comparing this environment to 1999 but rather trying to highlight a strategy of staging your buys into growth stocks.
KAM Advisors has long positions in MELI, MNST
In earnings news, stocks sporting positive reactions: MELI, MNST, AIG, and CRM. MELI was actually down last night after reporting, but by the time the market opened this morning investors were back in a buying mood. Stocks showing declines after reporting include ADSK and NEM to name a couple.
In economic news, the Univ. of Mich consumer sentiment survey improved to 75.3 in Feb. from 72.5 last month. New homes sales came in better than expected at 321,000 units in January, although that figure was slightly below the previous months level.
Asian markets were higher overnight, led by a 1.2% bounce in China. Europe is higher this morning as the concerns surrounding Greece calm a bit.
The euro is also getting a bounce at the expense of the dollar, while commodities are mixed. Oil prices are higher again near $108.15. Copper prices are also higher, but gold prices have eased back near $1775 and silver prices are slightly lower as well.
The 10-year yield is back below the 2.00% level, despite the improving economic data. It is very hard to tell how much of this is the Fed buying bonds to keep a lid on rates. Normally I would have expected the 10-yr to drift higher by now.
The VIX continues to drift lower also, down close to the 16.50 level this morning.
Trading comment: It's very hard to buy stocks that have broken out to new highs or that have gapped higher after reporting strong earnings. But those seem to be the stocks that are leading the market so far this year. One way to get comfortable with this is to buy a half position in stocks breaking out with the idea that you can add to your positions on a pullback. I remember buying a half position in JDSU in 1999 and it turned out to be one of my best trades ever. I'm not comparing this environment to 1999 but rather trying to highlight a strategy of staging your buys into growth stocks.
KAM Advisors has long positions in MELI, MNST
23 Şubat 2012 Perşembe
22 Şubat 2012 Çarşamba
Kudlow on MSNBC's "Morning Joe"
Visit msnbc.com for breaking news, world news, and news about the economy
Europe Economies Still Sluggish
The market is mixed in early trading, having started out in negative territory but currently trying to work its way back to the flat line.
Asian markets were higher overnight after China's manufacturing PMI increased to 49.7 from 48.8 last month. This figure is still below the key 50 level which marks the difference between expansion and contraction.
Europe's markets are lower today after its eurzone manufacturing PMI index inched up to 49.0 from 48.8 last month. But that 49.0 reading still points to contraction. Additionally, Greece had its credit rating downgraded again by Fitch and its market swooned by 5%. In England, some officials at the Bank of England have called for additional stimulus measures.
Stocks rising this morning on earnings include: FIRE, INTU, HSTM, and GRMN to name a few. Stocks declining on earnings are DELL, MGM, CAKE, DLTR, and CLH.
The euro is lower this morning, and most commodities are lower as well after a big up day yesterday. Oil prices are flat near $106; gold prices are slightly lower to $1756; silver prices are lower also, while copper prices are flat.
The 10-year yield is steady near 2.04% and the VIX is up slightly to 18.50.
Trading comment: Call me crazy, but I don't have much hope that the market will give underinvested bulls the pullback they are hoping for. Nothing has been able to knock down this market. Earnings misses have been shrugged off, options expiration was yawn, overbought readings were worked off effortlessly, and the Greek bailout dealings look like more of a distraction than anything. Look at AAPL-- that high volume reversal didn't lead to any follow-thru selling and the stock is back at new closing highs. Stocks have continued to stairstep higher, with sector rotation keeping any one group from seeing prolonged weakness. At some point we will surely have a correction, but waiting for it has been a losing strategy. I still think adding to leading stocks on pullbacks works best. Trying to invest in the year's laggards will likely continue to be frustrating.
KAM Advisors is long AAPL
Asian markets were higher overnight after China's manufacturing PMI increased to 49.7 from 48.8 last month. This figure is still below the key 50 level which marks the difference between expansion and contraction.
Europe's markets are lower today after its eurzone manufacturing PMI index inched up to 49.0 from 48.8 last month. But that 49.0 reading still points to contraction. Additionally, Greece had its credit rating downgraded again by Fitch and its market swooned by 5%. In England, some officials at the Bank of England have called for additional stimulus measures.
Stocks rising this morning on earnings include: FIRE, INTU, HSTM, and GRMN to name a few. Stocks declining on earnings are DELL, MGM, CAKE, DLTR, and CLH.
The euro is lower this morning, and most commodities are lower as well after a big up day yesterday. Oil prices are flat near $106; gold prices are slightly lower to $1756; silver prices are lower also, while copper prices are flat.
The 10-year yield is steady near 2.04% and the VIX is up slightly to 18.50.
Trading comment: Call me crazy, but I don't have much hope that the market will give underinvested bulls the pullback they are hoping for. Nothing has been able to knock down this market. Earnings misses have been shrugged off, options expiration was yawn, overbought readings were worked off effortlessly, and the Greek bailout dealings look like more of a distraction than anything. Look at AAPL-- that high volume reversal didn't lead to any follow-thru selling and the stock is back at new closing highs. Stocks have continued to stairstep higher, with sector rotation keeping any one group from seeing prolonged weakness. At some point we will surely have a correction, but waiting for it has been a losing strategy. I still think adding to leading stocks on pullbacks works best. Trying to invest in the year's laggards will likely continue to be frustrating.
KAM Advisors is long AAPL
21 Şubat 2012 Salı
A Bolder Romney Tax-Cut Plan Is Coming
Team Romney tells me there will be a bolder tax-cut plan released either at the debate tomorrow night (if Mitt gets it in) or more formally at his Detroit Economic Club speech on Friday. I’m embargoed from releasing details until tomorrow. But I can say that the new plan will be across-the-board with supply-side incentives from rate reduction, and that it will help small-business owners as well as everyone else.
Monday Morning Musings
The market is higher again this morning after Greece reportedly agreed to terms to receive its latest round of bailout funds to prevent it from defaulting on its debt. European markets are mostly lower this morning seeing a sell-the-news type of reaction to Greece.
Asian markets were mixed overnight, despite Chinese officials decision to trim the reserve requirement for banks.
More companies are reporting earnings this morning. Stocks rallying on their earnings reports include HD, M, and SKS to name a few. Stocks seeing disappointing reactions to earnings are WMT, CIEN, EXPD, and GPC.
The bounce in the euro is weighing on the dollar but helping commodities. Oil prices reached $105 this morning; gold prices have rallied back above $1755, and silver and copper prices are higher as well.
Energy and materials stocks are leading the early action, while defensive consumer staples and healthcare stocks are lagging.
The 10-year yield is higher to 2.05% near the top of its recent trading range. The VIX is also higher by 1.75% to 18.10 which is a little odd given the early gains in the market.
Trading comment: The Nasdaq finished last week higher marking the 7th consecutive week of gains. I went back to look for the last such streak and had to go back to the spring of 2010 to find one. Back then, the Nazz actually posted 8 straight weeks of gains but then the markets endured a sharp 10% correction over the next 2 weeks. I'm not saying the same thing will happen this time around, but the market remains overdue for more than just a one-day pullback like we've seen. That said, it has paid this year to focus more on individual stock than the overall market. The action in leading stocks continues to be strong.
Asian markets were mixed overnight, despite Chinese officials decision to trim the reserve requirement for banks.
More companies are reporting earnings this morning. Stocks rallying on their earnings reports include HD, M, and SKS to name a few. Stocks seeing disappointing reactions to earnings are WMT, CIEN, EXPD, and GPC.
The bounce in the euro is weighing on the dollar but helping commodities. Oil prices reached $105 this morning; gold prices have rallied back above $1755, and silver and copper prices are higher as well.
Energy and materials stocks are leading the early action, while defensive consumer staples and healthcare stocks are lagging.
The 10-year yield is higher to 2.05% near the top of its recent trading range. The VIX is also higher by 1.75% to 18.10 which is a little odd given the early gains in the market.
Trading comment: The Nasdaq finished last week higher marking the 7th consecutive week of gains. I went back to look for the last such streak and had to go back to the spring of 2010 to find one. Back then, the Nazz actually posted 8 straight weeks of gains but then the markets endured a sharp 10% correction over the next 2 weeks. I'm not saying the same thing will happen this time around, but the market remains overdue for more than just a one-day pullback like we've seen. That said, it has paid this year to focus more on individual stock than the overall market. The action in leading stocks continues to be strong.
19 Şubat 2012 Pazar
17 Şubat 2012 Cuma
Are Bond Yields Poised To Move Higher?
The market was higher in early trading, but has since given up those gains and is slightly in negative territory. The S&P 500 is down less than the Nazz so far, as financials and industrials are leading the early action while biotechs and other large-cap tech are lagging.
The yield on the 10-year note has moved above the 2.00% level by just a bit. The 10-year first fell to the 2.0% level last August and has been trading in a volatile but sideways fashion for the last six months. With economic datapoints improving, I would expect the 10-year yield to move a little higher despite the fact that the Fed is likely still buying long-term bonds.
Stocks trading higher after reporting earnings include AMAT, CPB, and HNZ to name a few. Stocks falling in reaction to earnings are BIDU, JWN, GIS, and HMSY.
Asian markets were higher overnight. The euro is also higher this morning, despite the fact we have no definitive news regarding the Greek debt situation.
Commodities are mixed. Oil prices are higher and have traded above $103; gold prices are slightly lower near $1724. Copper and silver prices are lower as well.
The VIX recently bounced off of its overhead 50-day near the 21.50 level but then moved sharply lower. Today it is down another 5.5% back to 18.15. At the time of the spike, I surmised it might have been exacerbated by this week's options expiration, which finishes today. So we will have to see if traders reload on puts next week and volatility spikes again.
Trading comment: The relentless march continues. The market has hit 9-month highs this morning. Growth stocks look to be subject to some profit taking today, but I don't expect it to last long. I still think the strategy of buying leading stocks on pullbacks will outperform, and by leading stocks I mean those that recently reported strong earnings and have been breaking out to new highs.
KAM Advisors has long positions in GIS
The yield on the 10-year note has moved above the 2.00% level by just a bit. The 10-year first fell to the 2.0% level last August and has been trading in a volatile but sideways fashion for the last six months. With economic datapoints improving, I would expect the 10-year yield to move a little higher despite the fact that the Fed is likely still buying long-term bonds.
Stocks trading higher after reporting earnings include AMAT, CPB, and HNZ to name a few. Stocks falling in reaction to earnings are BIDU, JWN, GIS, and HMSY.
Asian markets were higher overnight. The euro is also higher this morning, despite the fact we have no definitive news regarding the Greek debt situation.
Commodities are mixed. Oil prices are higher and have traded above $103; gold prices are slightly lower near $1724. Copper and silver prices are lower as well.
The VIX recently bounced off of its overhead 50-day near the 21.50 level but then moved sharply lower. Today it is down another 5.5% back to 18.15. At the time of the spike, I surmised it might have been exacerbated by this week's options expiration, which finishes today. So we will have to see if traders reload on puts next week and volatility spikes again.
Trading comment: The relentless march continues. The market has hit 9-month highs this morning. Growth stocks look to be subject to some profit taking today, but I don't expect it to last long. I still think the strategy of buying leading stocks on pullbacks will outperform, and by leading stocks I mean those that recently reported strong earnings and have been breaking out to new highs.
KAM Advisors has long positions in GIS
16 Şubat 2012 Perşembe
Financials Shrug Off Potential Moody's Downgrade
The markets are higher once again in early trading. Yesterday the market paused and gave back some ground, but it wasn't a big down day by historical standards. The market seems to be consolidating its recent gains in more of a sideways fashion as opposed to a meaningful pullback.
Today's news out of Moody's about potential downgrades in the financial sector are being shrugged off by the market. In recent months, this sort of news would have hit stocks and dragged down the financials. This goes to show how forgiving investor sentiment is currently.
In economic news, jobless claims came in better than expected for another week. And the Philly Fed survey was also better than expected coming in at 10.2 for February from 7.3 last month.
Earnings reports are a big of a mixed back this morning. While most folks focus on which companies beat or missed estimates, I like to also look at how stocks are reacting to earnings. This can give investors a good sense of how much of the prior quarter was already priced into stock prices.
Stocks rallying after reporting earnings include: GM, DUK, ASPS, and VFC. Stocks declining on earnings are: CBS, APA, MAR, CF, and WM to name a handful.
Asian markets were lower overnight, and Europe is lower today on continued concerns about Greek debt talks. The euro is also slightly lower today relative to the dollar.
Commodities are mostly lower as well. Oil prices are flattish near $101.75; gold prices are down near $1720; silver and copper prices are also lower on the day.
The 10-year yield is getting a bounce to the 1.97% level. And the VIX is down fractionally to 21.0 after a big rise in volatility yesterday.
Trading comment: Yesterday's action was completely colored by the action in AAPL. The stock is down further today, but it is now keeping the overall market down. Industrials are leading the early action, while healthcare stocks are lagging. Sector rotation continues and I still would look to add to stocks that recently gapped higher after reporting earnings if you can buy them on a dip. Those stocks should continue to lead the market.
KAM Advisors has long positions in AAPL
Today's news out of Moody's about potential downgrades in the financial sector are being shrugged off by the market. In recent months, this sort of news would have hit stocks and dragged down the financials. This goes to show how forgiving investor sentiment is currently.
In economic news, jobless claims came in better than expected for another week. And the Philly Fed survey was also better than expected coming in at 10.2 for February from 7.3 last month.
Earnings reports are a big of a mixed back this morning. While most folks focus on which companies beat or missed estimates, I like to also look at how stocks are reacting to earnings. This can give investors a good sense of how much of the prior quarter was already priced into stock prices.
Stocks rallying after reporting earnings include: GM, DUK, ASPS, and VFC. Stocks declining on earnings are: CBS, APA, MAR, CF, and WM to name a handful.
Asian markets were lower overnight, and Europe is lower today on continued concerns about Greek debt talks. The euro is also slightly lower today relative to the dollar.
Commodities are mostly lower as well. Oil prices are flattish near $101.75; gold prices are down near $1720; silver and copper prices are also lower on the day.
The 10-year yield is getting a bounce to the 1.97% level. And the VIX is down fractionally to 21.0 after a big rise in volatility yesterday.
Trading comment: Yesterday's action was completely colored by the action in AAPL. The stock is down further today, but it is now keeping the overall market down. Industrials are leading the early action, while healthcare stocks are lagging. Sector rotation continues and I still would look to add to stocks that recently gapped higher after reporting earnings if you can buy them on a dip. Those stocks should continue to lead the market.
KAM Advisors has long positions in AAPL
Dave Camp Spanks Tim Geithner
Michigan Republican Dave Camp, the chairman of the powerful tax-writing Ways and Means Committee, gave Treasury man Timothy Geithner a tough spanking yesterday. In a hearing on the president’s budget, Camp stated that nearly $2 trillion in tax increases will take more money away from employers, investors, and savers, and would push the top rates close to 45 percent. Camp noted that the bottom half of earners pay no federal income taxes, and that 70 percent of income taxes are paid by the top 10 percent, a group which includes the small businesses that are so important to job creation.
Why should Uncle Sam take nearly half of their income?
Camp then honed in on the Obama proposal to triple the tax on dividends from 15 percent to nearly 45 percent. The chairman went on the say, “Because dividends are paid out of income that has already been taxed at the corporate level and then are taxed again in the shareholder’s hands, this proposal would push the total federal tax rate on dividends to 64 percent.” (Italics mine.)
Camp next hammered Geithner on corporate tax reform. As in, “Where is your plan?” As in, “The U.S. will have the highest corporate tax rate in the industrial world.” Camp asked Geithner why the U.S. is at a competitive disadvantage in the world marketplace. (I would note that while the U.S. corporate rate is 39 percent, Canada’s combined federal-provincial corporate tax is 25 percent.) Camp could have added that Team Obama is going to have a corporate tax plan, and that it will raise $350 billion, including $150 billion for something called a “global minimum tax,” a new tax that has nothing to do with tax reform.
Finally, Camp hit Geithner on the debt problem, stating that our total debt load is now 102 percent of GDP -- certainly a warning point for future economic growth.
I’m glad Dave Camp is on the warpath. One thought: He should report his bold corporate-tax-reform plan out of committee and onto the floor, where the GOP House can then pass an exemplary pro-growth, corporate-tax reform to turn up the heat on the White House and the Democratic Senate.
15 Şubat 2012 Çarşamba
Will China Support Europe?
The markets are nicely higher this morning after a big rally late in the day yesterday reversed the earlier losses from the session.
Asian markets were higher overnight after comments from a China official that hinted at the country looking to increase its investment in the eurozone. This also appears to be helping European markets this morning, even as the euro is lagging. A couple of GDP reports out of Europe showed that Q4 GDP declined -0.2% in Germany but rose +0.2% in France. Both were a little better than expected.
In the past Chinese officials have said they are not looking to increase their investment in the troubled eurozone. So this would be a bit of a change, although we would still have to see what any involvement looked like. My guess would be they are more inclined to invest directly in companies over there, especially natural resource companies, as opposed to simply lending to over-indebted governments.
In earnings news, positive reactions to earnings reports continue to trump negative ones. The list of stocks rallying after earnings includes: CMCSA, TEVA, MET, WCG, ANF, DF, DVN, and VMI. The only major stock trading down after earnings is Deere (DE).
In economic news, the Empire Manufacturing index for Feb. rose to 19.5 from 13.5 the prior month. The Housing Market index also improved in Feb. to 29 from 25 in January. These are small datapoints that continue to line up on the side of the ledger that supports a continued improving economic outlook in the U.S.
Commodities are mostly higher today. Oil prices are higher again near $101.70; gold prices are higher to $1733; silver prices are also higher, while copper prices are lower so far.
The 10-year yield is up just slightly to 1.94%; and the VIX is up +5% right now to 20.56. The higher VIX today is a bit odd given the gains in the market, and could be related to positioning ahead of this Friday's options expiration.
Trading comment: The action in stocks continues to be very positive. The list of those looking for a correction continues to grow. I even had a client call me yesterday and ask if we should be looking for a correction. Alas, it's never that easy, is it? AAPL just crossed the $500 mark on Monday and its already testing $525 today. The list of market leading growth stocks also continues to broaden, which is a marked change from 2011 when defensive stocks like utilities and consumer staples fared the best.
KAM Advisors has long positions in AAPL and DE
Asian markets were higher overnight after comments from a China official that hinted at the country looking to increase its investment in the eurozone. This also appears to be helping European markets this morning, even as the euro is lagging. A couple of GDP reports out of Europe showed that Q4 GDP declined -0.2% in Germany but rose +0.2% in France. Both were a little better than expected.
In the past Chinese officials have said they are not looking to increase their investment in the troubled eurozone. So this would be a bit of a change, although we would still have to see what any involvement looked like. My guess would be they are more inclined to invest directly in companies over there, especially natural resource companies, as opposed to simply lending to over-indebted governments.
In earnings news, positive reactions to earnings reports continue to trump negative ones. The list of stocks rallying after earnings includes: CMCSA, TEVA, MET, WCG, ANF, DF, DVN, and VMI. The only major stock trading down after earnings is Deere (DE).
In economic news, the Empire Manufacturing index for Feb. rose to 19.5 from 13.5 the prior month. The Housing Market index also improved in Feb. to 29 from 25 in January. These are small datapoints that continue to line up on the side of the ledger that supports a continued improving economic outlook in the U.S.
Commodities are mostly higher today. Oil prices are higher again near $101.70; gold prices are higher to $1733; silver prices are also higher, while copper prices are lower so far.
The 10-year yield is up just slightly to 1.94%; and the VIX is up +5% right now to 20.56. The higher VIX today is a bit odd given the gains in the market, and could be related to positioning ahead of this Friday's options expiration.
Trading comment: The action in stocks continues to be very positive. The list of those looking for a correction continues to grow. I even had a client call me yesterday and ask if we should be looking for a correction. Alas, it's never that easy, is it? AAPL just crossed the $500 mark on Monday and its already testing $525 today. The list of market leading growth stocks also continues to broaden, which is a marked change from 2011 when defensive stocks like utilities and consumer staples fared the best.
KAM Advisors has long positions in AAPL and DE
14 Şubat 2012 Salı
Obama's Class-Warfare, Tax-the-Rich Budget
If you shake out the Obama budget in terms of bold headlines, it’s really a class-warfare, tax-the-rich budget. Layer upon layer of tax hikes are piled on successful investors, small-business owners, and corporations.
The capital-gains tax goes from 15 percent to 24 percent (including Obamacare). The dividends tax goes from 15 percent to nearly 40 percent, and that’s not including the double tax on corporate profits embodied in dividends and capital gains. The Bush tax cuts for top earners are repealed. There’s the 30 percent Buffett-rule minimum tax on millionaires. The carried-interest tax for private equity, hedge funds, and other investment partnerships goes from 15 to 39.6 percent. The estate tax jumps to 45 percent. Oil and gas companies get hit. And there’s probably more stuff in there I haven’t read yet. (Jimmy P. lays it out nicely.) Paul Ryan’s press release calls it $1.9 trillion tax hike, with $47 trillion in government spending over the next decade and the fourth straight year of trillion-dollar deficits.
Some kind of corporate tax reform may be released in a few weeks. But we don’t know much about it. And while it may lower the top rate, it’s going to penalize U.S. firms operating abroad. Just what business does not want.
Former Bush economist Keith Hennessey estimates that new proposals would create a ratio of 1.2 dollars of tax increases for every dollar cut in spending. Most of the spending cuts would slam Medicare doctors and other health providers. Unlikely to happen. And there is no overall entitlement reform. Somehow the Obama budget is being offered as a substitute for the $1.2 trillion in spending cuts from the supercommittee. But the slam down in defense remains a huge problem.
The deficit for the coming year, which is $1.3 trillion, would be 8.5 percent of GDP. More important, budget spending remains at over 24 percent of GDP. Debt held by the public for 2013 would be $12.7 trillion, or 77.4 percent of GDP. In terms of ten-year totals, spending would rise by $47 trillion and deficits by $6.7 trillion.
Really, this is a budget that says we must raise taxes in order to raise spending. It’s a 1 percent vs. 99 percent budget. But if these tax hikes ever went through it would be a 100 percent whack at future economic growth.
Obama chief of staff Jack Lew was wrong yesterday to suggest that a budget passed in the Senate requires 60 votes. By law, budget reconciliation requires only 51 votes. But this budget is dead on arrival. All the Republicans and many of the Democrats are not going to vote for across-the-board tax hikes. That’s a good thing.
But the question now is: What happens next? The U.S. is in a heap of fiscal trouble -- on the verge of bankruptcy. What are we going to do about it?
The capital-gains tax goes from 15 percent to 24 percent (including Obamacare). The dividends tax goes from 15 percent to nearly 40 percent, and that’s not including the double tax on corporate profits embodied in dividends and capital gains. The Bush tax cuts for top earners are repealed. There’s the 30 percent Buffett-rule minimum tax on millionaires. The carried-interest tax for private equity, hedge funds, and other investment partnerships goes from 15 to 39.6 percent. The estate tax jumps to 45 percent. Oil and gas companies get hit. And there’s probably more stuff in there I haven’t read yet. (Jimmy P. lays it out nicely.) Paul Ryan’s press release calls it $1.9 trillion tax hike, with $47 trillion in government spending over the next decade and the fourth straight year of trillion-dollar deficits.
Some kind of corporate tax reform may be released in a few weeks. But we don’t know much about it. And while it may lower the top rate, it’s going to penalize U.S. firms operating abroad. Just what business does not want.
Former Bush economist Keith Hennessey estimates that new proposals would create a ratio of 1.2 dollars of tax increases for every dollar cut in spending. Most of the spending cuts would slam Medicare doctors and other health providers. Unlikely to happen. And there is no overall entitlement reform. Somehow the Obama budget is being offered as a substitute for the $1.2 trillion in spending cuts from the supercommittee. But the slam down in defense remains a huge problem.
The deficit for the coming year, which is $1.3 trillion, would be 8.5 percent of GDP. More important, budget spending remains at over 24 percent of GDP. Debt held by the public for 2013 would be $12.7 trillion, or 77.4 percent of GDP. In terms of ten-year totals, spending would rise by $47 trillion and deficits by $6.7 trillion.
Really, this is a budget that says we must raise taxes in order to raise spending. It’s a 1 percent vs. 99 percent budget. But if these tax hikes ever went through it would be a 100 percent whack at future economic growth.
Obama chief of staff Jack Lew was wrong yesterday to suggest that a budget passed in the Senate requires 60 votes. By law, budget reconciliation requires only 51 votes. But this budget is dead on arrival. All the Republicans and many of the Democrats are not going to vote for across-the-board tax hikes. That’s a good thing.
But the question now is: What happens next? The U.S. is in a heap of fiscal trouble -- on the verge of bankruptcy. What are we going to do about it?
Moody's Downgrades More European Countries
The market is lower this morning in early trading, but if the recent pattern continues then that would mean that the dip buyers will appear at some point and the market will close in positive territory. I'm not saying that will happen, just that has been the pattern in recent weeks.
Yesterday the market cheered the Greek austerity package. But today there is a slightly different tone after Moody's downgraded the countries of Spain, Italy, Portugal, Slovakia and Slovenia. Moody's said these countries as being susceptible to the growing financial and macroeconomic risks.
There was another handful of earnings reports out last night and this morning. On the upside are a couple of standounts such as RAX and KORS. On the downside are stocks such as BWA, UTHR, CPLA, and GT. FOSL had started out lower in reaction to earnings, but has since reversed higher on strong volume.
In economic news, retail sales for January rose 0.4%, which was below expectations. But the ex-autos figure was 0.7% which was higher than consensus estimates and above last month.
Asian markets were higher overnight after Japan announced that it has expanded its asset purchase program.
The dollar is higher this morning, and most commodities are slightly lower. Oil prices are higher near $101, gold prices are flat around $1725, but copper prices are lower.
The 10-year yield has started to drift lower to 1.94%, which is right around its 50-day average. The VIX is up nearly 5% to just under the 20 level.
Trading comment: Healthcare stocks are leading the action this morning. Nearly all of the healthcare stocks I follow on my screen are bucking the early weakness. ESRX is acting better, shaking off last week's rumors about its acquisition. ISRG is surging to new highs. While we often focus on how "the market" is doing overall, this year could yield better results for those who focus on individual stocks.
KAM Advisors has long positions in BWA, ESRX, GLD
Yesterday the market cheered the Greek austerity package. But today there is a slightly different tone after Moody's downgraded the countries of Spain, Italy, Portugal, Slovakia and Slovenia. Moody's said these countries as being susceptible to the growing financial and macroeconomic risks.
There was another handful of earnings reports out last night and this morning. On the upside are a couple of standounts such as RAX and KORS. On the downside are stocks such as BWA, UTHR, CPLA, and GT. FOSL had started out lower in reaction to earnings, but has since reversed higher on strong volume.
In economic news, retail sales for January rose 0.4%, which was below expectations. But the ex-autos figure was 0.7% which was higher than consensus estimates and above last month.
Asian markets were higher overnight after Japan announced that it has expanded its asset purchase program.
The dollar is higher this morning, and most commodities are slightly lower. Oil prices are higher near $101, gold prices are flat around $1725, but copper prices are lower.
The 10-year yield has started to drift lower to 1.94%, which is right around its 50-day average. The VIX is up nearly 5% to just under the 20 level.
Trading comment: Healthcare stocks are leading the action this morning. Nearly all of the healthcare stocks I follow on my screen are bucking the early weakness. ESRX is acting better, shaking off last week's rumors about its acquisition. ISRG is surging to new highs. While we often focus on how "the market" is doing overall, this year could yield better results for those who focus on individual stocks.
KAM Advisors has long positions in BWA, ESRX, GLD
13 Şubat 2012 Pazartesi
Monday Morning Musings
The market is higher this morning on relative light newsflow other than the headlines out of Greece. Greece's parliament has approved the new austerity measures it needed to accept in order to get its latest round of bailout funds.
The news has helped push European markets higher, as well as the euro. Asian markets were also higher overnight. But there is very little in the way of domestic economic data out this morning or corporate earnings reports of any consequence.
Friday's action saw one of the first selloffs of the year, but so far the action has not carried over this morning. Financial stocks are strongest so far, while defensive stocks like utilities are lagging.
The dollar is lower and most commodities are higher. Oil prices are up near $99.70, gold and silver prices are up slightly, while copper looks to be lower right now.
The 10-year yield is flattish around 1.96%. And the VIX is down -5.7% so far to 19.61 after a big spike higher on Friday that took the VIX all the way up to touch its overhead 50-day average.
Trading comment: The stairstep higher action continues. Most stocks have given little reason to sell them, and growth stocks continue act better than their defensive counterparts that led for most of 2011. Investor sentiment continues to grow more bullish, but has still yet to reach extreme readings that in the past have led to sharp selloffs. One anecdotal sentiment call was this weekend's Barron's cover, which said Dow 15,000 on it. Such bullish cover stories in the past have often coincided with bullish sentiment nearing some sort of peak.
The news has helped push European markets higher, as well as the euro. Asian markets were also higher overnight. But there is very little in the way of domestic economic data out this morning or corporate earnings reports of any consequence.
Friday's action saw one of the first selloffs of the year, but so far the action has not carried over this morning. Financial stocks are strongest so far, while defensive stocks like utilities are lagging.
The dollar is lower and most commodities are higher. Oil prices are up near $99.70, gold and silver prices are up slightly, while copper looks to be lower right now.
The 10-year yield is flattish around 1.96%. And the VIX is down -5.7% so far to 19.61 after a big spike higher on Friday that took the VIX all the way up to touch its overhead 50-day average.
Trading comment: The stairstep higher action continues. Most stocks have given little reason to sell them, and growth stocks continue act better than their defensive counterparts that led for most of 2011. Investor sentiment continues to grow more bullish, but has still yet to reach extreme readings that in the past have led to sharp selloffs. One anecdotal sentiment call was this weekend's Barron's cover, which said Dow 15,000 on it. Such bullish cover stories in the past have often coincided with bullish sentiment nearing some sort of peak.
10 Şubat 2012 Cuma
PORTFOLIO CHANGE
A portfolio change has been posted to the website.
Blogger is still having problems with comments over 200. If you click on the title of the post you will be able to see all comments in the thread.
Blogger is still having problems with comments over 200. If you click on the title of the post you will be able to see all comments in the thread.
9 Şubat 2012 Perşembe
Greece: Buy The Rumor, Sell The News?
The market is slightly lower in early trading despite rumors circulating that a deal has been made between Greece politicians on the austerity measures. I have to wonder if we will see the classic buy the rumor, sell the news reaction. By that I mean that the market has been running higher on the perception that a Greek deal was in the works. Now that we might actually have an official deal, the market could be ready to take a breather.
There was another large handful of earnings reports last night and this morning. Stocks trading higher after reporting earnings include: ALXN, V, AKAM, SCSS, and PM. Stocks trading lower on earnings reports are CSCO, NWSA, PRU, and PEP to name a few.
In economic news, weekly jobless claims fell to 358,000. This was an improvement vs. last week's tally of 370,000.
Asian markets were mixed overnight. A key inflation reading in China came in above expectations. Europe's markets were slightly higher on Greek rumors, and the euro is also higher.
Commodities are getting a boost from the weaker dollar today. Oil prices are higher near $99.60, gold prices are up to $1750, and copper and silver prices are higher also.
The 10-year yield is rallying further, now up to 2.04%. And the VIX is 3% higher so far to 18.70.
Trading comment: Interesting action in AAPL lately. I'm not sure why the steady flow of funds into the stock. Of course, AAPL has been undervalued on a PE basis for a long time. So it could be that investors are suddenly willing to give it its due and a higher multiple to boot. I don't like the recent parabolic action in the stock. Maybe that's just the nightmares I still have about YHOO in 2000. But I would like to see AAPL make a more constructive base, or at least show an ascent on the chart that isn't so steep. I bet that's the first time you ever heard a money manager complain about making money, huh?
KAM Advisors has long positions in: AAPL, ALXN, SCSS, PM
There was another large handful of earnings reports last night and this morning. Stocks trading higher after reporting earnings include: ALXN, V, AKAM, SCSS, and PM. Stocks trading lower on earnings reports are CSCO, NWSA, PRU, and PEP to name a few.
In economic news, weekly jobless claims fell to 358,000. This was an improvement vs. last week's tally of 370,000.
Asian markets were mixed overnight. A key inflation reading in China came in above expectations. Europe's markets were slightly higher on Greek rumors, and the euro is also higher.
Commodities are getting a boost from the weaker dollar today. Oil prices are higher near $99.60, gold prices are up to $1750, and copper and silver prices are higher also.
The 10-year yield is rallying further, now up to 2.04%. And the VIX is 3% higher so far to 18.70.
Trading comment: Interesting action in AAPL lately. I'm not sure why the steady flow of funds into the stock. Of course, AAPL has been undervalued on a PE basis for a long time. So it could be that investors are suddenly willing to give it its due and a higher multiple to boot. I don't like the recent parabolic action in the stock. Maybe that's just the nightmares I still have about YHOO in 2000. But I would like to see AAPL make a more constructive base, or at least show an ascent on the chart that isn't so steep. I bet that's the first time you ever heard a money manager complain about making money, huh?
KAM Advisors has long positions in: AAPL, ALXN, SCSS, PM
8 Şubat 2012 Çarşamba
Positive Earnings Reactions Continue To Outpace Negative Reactions
The market is slightly higher in early trading. For the first morning in awhile, there were no headlines out of Greece about progress or delays in its debt settlement talks.
Asian markets were higher overnight, led by China after the govt. raised gasoline prices and also provided support to the real estate market by instructing lenders to accommodate first time homebuyers.
In earnings news, positive reactions to earnings reports continue to outpace negative ones. Among the stocks rising after reporting are: TWX, DIS, CVS, AGU, IR, and the big ones of the day - RL and BWLD. Stocks declining after earnings include S, PNRA, and OPEN.
The euro is roughly flat this morning, and commodities are mixed. Oil prices are higher to $99.60, nearing the $100 level again. Gold prices are slightly lower nearing $1740. Silver prices are also lower, but copper prices are getting a boost.
The 10-year yield is rising further to 1.99%. The 2.00% level has acted like a magnet since early November. The VIX is flattish near the 17.60 level.
Trading comment: The stairstep higher action continues in the market. Those waiting for a pullback continue to be frustrated. This year is shaping up so far to be a year where it is proving more profitable to focus on individual stocks rather than the major indexes. I am focusing on those stocks that continue to show leadership and work their way to new highs. Also, stocks that have posted strong earnings and reacted positively should continue to act well. I think chasing laggards here in hopes of them playing catch up is a prescription for underperformance.
Asian markets were higher overnight, led by China after the govt. raised gasoline prices and also provided support to the real estate market by instructing lenders to accommodate first time homebuyers.
In earnings news, positive reactions to earnings reports continue to outpace negative ones. Among the stocks rising after reporting are: TWX, DIS, CVS, AGU, IR, and the big ones of the day - RL and BWLD. Stocks declining after earnings include S, PNRA, and OPEN.
The euro is roughly flat this morning, and commodities are mixed. Oil prices are higher to $99.60, nearing the $100 level again. Gold prices are slightly lower nearing $1740. Silver prices are also lower, but copper prices are getting a boost.
The 10-year yield is rising further to 1.99%. The 2.00% level has acted like a magnet since early November. The VIX is flattish near the 17.60 level.
Trading comment: The stairstep higher action continues in the market. Those waiting for a pullback continue to be frustrated. This year is shaping up so far to be a year where it is proving more profitable to focus on individual stocks rather than the major indexes. I am focusing on those stocks that continue to show leadership and work their way to new highs. Also, stocks that have posted strong earnings and reacted positively should continue to act well. I think chasing laggards here in hopes of them playing catch up is a prescription for underperformance.
7 Şubat 2012 Salı
Bernanke: Right on Taxes
For one time in a row Fed head Ben Bernanke got the story right. No, it wasn’t King Dollar. It was taxes.
Testifying before members of the Senate Budget Committee today, Bernanke referred to the scheduled repeal of the Bush tax cuts. He said, “If no action is taken by January 2013, there will be a very sharp change in the fiscal stance of the United States government.”
Now, lest we give him too much credit, Bernanke was kind of making a Keynesian point. Why? Because he said in his “fiscal stance” argument that sharp spending cuts would also damage recovery. But at least he made his tax-hike opposition clear. And at least he opposes higher tax rates, which would in fact damage the economy.
He could have gone further. The Wall Street Journal is reporting that President Obama’s budget for 2013 will propose higher tax rates on the rich. Additionally, Obamacare in 2013 will raise the payroll tax 3.9 percent, and apply that to investment taxes such as capital gains and dividends.
Bernanke didn’t comment either on Obama’s millionaire-tax proposal or the Obamacare tax hike. But you can be sure investors and entrepreneurs are well aware of it.
Will Dip Buyers Continue To Surface?
Lately it seems like every dip we've seen in the market has been quickly bought by folks looking to get more invested and put money to work in equities. With the market down slightly again this morning the question is will dip buyers continue to show up?
Earnings reports continue to garner positive reactions for the most part. The list of stocks moving higher after reporting includes: KO, SWI, HAR, PRGO, TDG, CSTR, APC, and YUM. A couple of stocks lower on their earnings reports are EMR and GSK.
Asian markets were lower overnight, led by a 1.7% loss in China. Europe's markets are also lower this morning amid continued delays in Greece's acceptance of austerity measures.
The euro is getting a bounce though, with the dollar lower. This is boosting commodities. Oil prices are back above $98 and gold prices are higher near $1735.
The 10-year yield is getting a nice bounce to 1.97%, poking just above its overhead 50-day average. For reference, the January highs were 2.09%. As for the VIX, it was higher earlier on but has since given up its earlier gains and is flat near $17.70.
Trading comment: Buy the dip remains the mantra that has worked so far this year. Investor sentiment continues to grow more bullish, but the indicators I follow are still far from levels that would indicate bullishness has reached extreme levels of too much complacency. Over the last few year, fund flows have been heavily tilted towards bond funds. It could be that we are beginning to see a reallocation out of some of those safety funds into investor allocations that are once again beginning to favor the growth side of the equation more. I know we are having those discussions at our firm, so it wouldn't surprise me to hear its going on at a lot of other firms as well.
KAM Advisors has long positions in EMR, KO, SWI, GLD, YUM
Earnings reports continue to garner positive reactions for the most part. The list of stocks moving higher after reporting includes: KO, SWI, HAR, PRGO, TDG, CSTR, APC, and YUM. A couple of stocks lower on their earnings reports are EMR and GSK.
Asian markets were lower overnight, led by a 1.7% loss in China. Europe's markets are also lower this morning amid continued delays in Greece's acceptance of austerity measures.
The euro is getting a bounce though, with the dollar lower. This is boosting commodities. Oil prices are back above $98 and gold prices are higher near $1735.
The 10-year yield is getting a nice bounce to 1.97%, poking just above its overhead 50-day average. For reference, the January highs were 2.09%. As for the VIX, it was higher earlier on but has since given up its earlier gains and is flat near $17.70.
Trading comment: Buy the dip remains the mantra that has worked so far this year. Investor sentiment continues to grow more bullish, but the indicators I follow are still far from levels that would indicate bullishness has reached extreme levels of too much complacency. Over the last few year, fund flows have been heavily tilted towards bond funds. It could be that we are beginning to see a reallocation out of some of those safety funds into investor allocations that are once again beginning to favor the growth side of the equation more. I know we are having those discussions at our firm, so it wouldn't surprise me to hear its going on at a lot of other firms as well.
KAM Advisors has long positions in EMR, KO, SWI, GLD, YUM
6 Şubat 2012 Pazartesi
Monday Morning Musings
The markets are lower this morning on further delays with the Greek debt talks. Also, don't rule out the fact that the market had a very strong week last week, so some consolidation would be normal.
I called the Greek debt situation a yo-yo recently since we continue to see so much back and forth with the talks. Today it appears that Greece does not really want to implement the austerity measures as they have been laid out. I'm not sure how much wiggle room they have considering how badly they need the loans just to make their current debt payments.
There is little in the way of economic reports this morning. There have been a handful of earnings reports, but more of them are seeing negative reactions today. Stocks down after reporting include: HUM, SYY, LAZ, and SOHU. A couple stocks higher on earnings are HAS and BRO.
Asian stocks were mixed overnight. Japan was higher, but China was flat after the IMF trimmed its economic forecast for the country to 8.25% from 9.00% on weaker demand for exports.
The euro is lower and boosting the dollar. This is weighing on most commodities. Oil prices are lower to $97.25, gold prices are down to $1721, and silver and copper prices are also lower.
The 10-year yield is slightly lower at 1.92% after a nice pop higher on Friday due to the strong jobs report. The VIX is up almost 5% to 17.93 after plunging to a 7-month low on Friday.
Trading comment: With the market lower this morning, it will be interesting to see if dip buyers quickly step up again. The market is still overbought, but pullbacks have been few and far between. Friday's strong jobs report didn't help the bears at all, as it adds another economic indicator flashing improvement for the economy. New highs on the exchanges rose on Friday, and leadership in the stock market continues to broaden. This is another positive sign for the market.
I called the Greek debt situation a yo-yo recently since we continue to see so much back and forth with the talks. Today it appears that Greece does not really want to implement the austerity measures as they have been laid out. I'm not sure how much wiggle room they have considering how badly they need the loans just to make their current debt payments.
There is little in the way of economic reports this morning. There have been a handful of earnings reports, but more of them are seeing negative reactions today. Stocks down after reporting include: HUM, SYY, LAZ, and SOHU. A couple stocks higher on earnings are HAS and BRO.
Asian stocks were mixed overnight. Japan was higher, but China was flat after the IMF trimmed its economic forecast for the country to 8.25% from 9.00% on weaker demand for exports.
The euro is lower and boosting the dollar. This is weighing on most commodities. Oil prices are lower to $97.25, gold prices are down to $1721, and silver and copper prices are also lower.
The 10-year yield is slightly lower at 1.92% after a nice pop higher on Friday due to the strong jobs report. The VIX is up almost 5% to 17.93 after plunging to a 7-month low on Friday.
Trading comment: With the market lower this morning, it will be interesting to see if dip buyers quickly step up again. The market is still overbought, but pullbacks have been few and far between. Friday's strong jobs report didn't help the bears at all, as it adds another economic indicator flashing improvement for the economy. New highs on the exchanges rose on Friday, and leadership in the stock market continues to broaden. This is another positive sign for the market.
5 Şubat 2012 Pazar
DANGEROUS TIMES AHEAD
Friday's big rally on the better than expected employment report has now generated the kind of euphoria that often creates intermediate degree tops. This coming week will be the 18th week of the current intermediate cycle. As you can see in the chart below the intermediate cycle runs on average 18-25 weeks from trough to trough.
The time to buy "anything" is when the stock market puts in one of these intermediate degree bottoms. It's way too late in the intermediate cycle, especially with the NASDAQ stretched 9% above its 50 day moving for anyone to be buying now. Now is the time for investors to be taking profits. And by taking profits I don't mean selling short. I mean moving to cash.
The simple fact is that selling short is a fools game designed to take money away from retail investors. The only people that will ever make any consistent long-term gains by selling short are the very elite traders of the world, or big funds with massive research departments that can ferret out and find sick or failing companies.
What most traders who try to sell short fail to understand is that markets go down differently than they go up. This fact makes it very difficult to make, and more importantly keep, any profits garnered by selling short.
First off, tops are often a long drawn out process. They tend to whipsaw short-sellers to death before finally rolling over. I would say we have seen a very good example of that over the last four weeks.
Then even if one does manage to catch the top the intraday moves are often so violent that they knock one out of their positions. And finally if you mistime the bottom you will give back most if not all of your meager profits during the first couple of days of the new rally.
All in all, the best position for 99% of traders is to go to cash when a correction is due. As you can see by that first chart a correction is now due. That doesn't mean that it will begin Monday morning or even this week. What it does mean is that it is now too dangerous to continue playing musical chairs with a market that is at great risk of a sharp corrective move.
The fact is that ever since the dollar put in its three year cycle low in May, trading conditions have changed. Trades had to become much shorter in duration and profits taken much quicker.
Until the dollars major three year cycle tops that isn't going to change. As you can see in the chart below we still have no confirmation of a major trend reversal yet. The dollar is still making higher highs and higher lows. It's still holding well above a rising 200 day moving average and it hasn't even turned the 50 day moving average down yet.
Once the stock market begins moving down into its intermediate cycle low it will almost certainly force another rally in the dollar, possibly (probably) back to new 52 week highs.That should at a very minimum pressure gold to retest the December lows, and if the selling pressure from the stock market is intense enough we could see another marginal new low somewhere in the high 1400s to low $1500 level.
I should point out that gold still has not broken the pattern of lower lows and lower highs despite the powerful rally out of the December 29 bottom. Technically gold is still in a down trend. That down trend may be reconfirmed when the stock market drops down into its intermediate degree bottom.
I know we all want gold to immediately return to the days of strong trending moves, long trade durations, and easy money. It's only natural for investors to long for the good old days. It's what causes investors to chase (in vain) the last bull market. Think of all the investors that are still chasing the tech bubble of 2000, or the millions of investors still trying to pick the bottom of the housing market, or more recently energy investors struggling to figure out why solar and oil service stocks have underperformed so badly for the last three years.
These are bubbles that have already had their day. They are never going to see those glory days again. Living in the past never made anyone rich. The people that get rich are the ones that figure out early where the next bull market is going to be.
That being said, gold is most certainly not in a bubble yet. But the last massive C-wave obviously topped in September. That was the largest and longest C-wave of this entire secular bull market. Once something like that tops it takes months if not a year or more to consolidate those gains before the next leg up can begin.
Analysts that are predicting $2000 plus gold for this year are just kidding themselves. Gold is almost certainly going to be locked in a very choppy, extended trading range till at least the fall and probably into next spring before the next C-wave can breakout to new highs.
As distasteful as it is, investors need to accept the fact that it's going to be very hard to make money in the precious metals sector this year, and the only way to do so will continue to be with short-term trading strategies until we have confirmation that the dollars three year cycle has topped.
At the moment precious metal investors have the guillotine of the stock market hanging over them just like everyone else. Historically the selling pressure from an intermediate degree decline in the stock market will force an average decline of about 19% from peak to trough in mining stocks. Right now the mining sector is in a weakened state with the HUI holding below a declining 200 day moving average. That's not exactly the best position to weather the intense selling pressure generated by an intermediate degree decline in the stock market.
My advice for precious metals investors is the same as it is for everyone else. Go to cash and be prepared to buy when the stock market puts in an intermediate bottom in late February to mid March.
The time to buy "anything" is when the stock market puts in one of these intermediate degree bottoms. It's way too late in the intermediate cycle, especially with the NASDAQ stretched 9% above its 50 day moving for anyone to be buying now. Now is the time for investors to be taking profits. And by taking profits I don't mean selling short. I mean moving to cash.
The simple fact is that selling short is a fools game designed to take money away from retail investors. The only people that will ever make any consistent long-term gains by selling short are the very elite traders of the world, or big funds with massive research departments that can ferret out and find sick or failing companies.
What most traders who try to sell short fail to understand is that markets go down differently than they go up. This fact makes it very difficult to make, and more importantly keep, any profits garnered by selling short.
First off, tops are often a long drawn out process. They tend to whipsaw short-sellers to death before finally rolling over. I would say we have seen a very good example of that over the last four weeks.
Then even if one does manage to catch the top the intraday moves are often so violent that they knock one out of their positions. And finally if you mistime the bottom you will give back most if not all of your meager profits during the first couple of days of the new rally.
All in all, the best position for 99% of traders is to go to cash when a correction is due. As you can see by that first chart a correction is now due. That doesn't mean that it will begin Monday morning or even this week. What it does mean is that it is now too dangerous to continue playing musical chairs with a market that is at great risk of a sharp corrective move.
The fact is that ever since the dollar put in its three year cycle low in May, trading conditions have changed. Trades had to become much shorter in duration and profits taken much quicker.
Until the dollars major three year cycle tops that isn't going to change. As you can see in the chart below we still have no confirmation of a major trend reversal yet. The dollar is still making higher highs and higher lows. It's still holding well above a rising 200 day moving average and it hasn't even turned the 50 day moving average down yet.
Once the stock market begins moving down into its intermediate cycle low it will almost certainly force another rally in the dollar, possibly (probably) back to new 52 week highs.That should at a very minimum pressure gold to retest the December lows, and if the selling pressure from the stock market is intense enough we could see another marginal new low somewhere in the high 1400s to low $1500 level.
I should point out that gold still has not broken the pattern of lower lows and lower highs despite the powerful rally out of the December 29 bottom. Technically gold is still in a down trend. That down trend may be reconfirmed when the stock market drops down into its intermediate degree bottom.
I know we all want gold to immediately return to the days of strong trending moves, long trade durations, and easy money. It's only natural for investors to long for the good old days. It's what causes investors to chase (in vain) the last bull market. Think of all the investors that are still chasing the tech bubble of 2000, or the millions of investors still trying to pick the bottom of the housing market, or more recently energy investors struggling to figure out why solar and oil service stocks have underperformed so badly for the last three years.
These are bubbles that have already had their day. They are never going to see those glory days again. Living in the past never made anyone rich. The people that get rich are the ones that figure out early where the next bull market is going to be.
That being said, gold is most certainly not in a bubble yet. But the last massive C-wave obviously topped in September. That was the largest and longest C-wave of this entire secular bull market. Once something like that tops it takes months if not a year or more to consolidate those gains before the next leg up can begin.
Analysts that are predicting $2000 plus gold for this year are just kidding themselves. Gold is almost certainly going to be locked in a very choppy, extended trading range till at least the fall and probably into next spring before the next C-wave can breakout to new highs.
As distasteful as it is, investors need to accept the fact that it's going to be very hard to make money in the precious metals sector this year, and the only way to do so will continue to be with short-term trading strategies until we have confirmation that the dollars three year cycle has topped.
At the moment precious metal investors have the guillotine of the stock market hanging over them just like everyone else. Historically the selling pressure from an intermediate degree decline in the stock market will force an average decline of about 19% from peak to trough in mining stocks. Right now the mining sector is in a weakened state with the HUI holding below a declining 200 day moving average. That's not exactly the best position to weather the intense selling pressure generated by an intermediate degree decline in the stock market.
My advice for precious metals investors is the same as it is for everyone else. Go to cash and be prepared to buy when the stock market puts in an intermediate bottom in late February to mid March.
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