Archive for May, 2010

  • Hold on Tight!
    , May 20th, 2010 at 9:42 am

    We’re getting very close to our Flash Crash low of 1065. Of the 500 stocks in the S&P 500, 490 are lower today. Once again, it’s the cyclicals that are doing the worst.

  • Yesterday’s Strategy Session
    , May 19th, 2010 at 1:43 pm

    I want to thank Charles Kirk for bringing me on yesterday’s Strategy Session. In case you missed it, here it is. I also wanted to thank all the participants. It was a lot of fun!

  • Core Inflation at 44-Year Low
    , May 19th, 2010 at 12:12 pm

    Today’s consumer inflation report showed that year-over-year core inflation (which excludes food and energy prices) reached a 44-year low. Over the past 12 months, core prices rose by just 0.92%.
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    This report also broke a string of 171 straight months where the core CPI came in between 1% and 3%.

  • S&P 500 Nears 200-DMA
    , May 19th, 2010 at 11:50 am

    The S&P 500 is close to its 200-day moving average. This is simply the average of the last 200 trading days.
    big.chart051910.gif
    I’ve mentioned that I’m not a terribly big fan of technical analysis. One exception is the 200DMA because it has a pretty decent track record. Here’s what I wrote last year.

    So does the 200DMA work? The evidence suggests that it’s a pretty good indicator of future price performance. When the S&P 500 has been below the 200DMA, it’s dropped a total of about 20% over the equivalent of 27 years. In other words, the S&P 500 has been below its 200DMA about one-third of the time.
    Historically, the best time to invest has been when the S&P is less than 1.7% below the 200DMA.
    When the index is above the 200DMA, well, then everything looks much brighter. All of the market’s gain and then some have happen when we’re above the 200DMA which occurs about two-thirds of the time.
    The market seems to like nearly every point of being above the 200DMA. Danger only clicks in when the S&P 500 is over 17.5% above the 200DMA which is a very high reading.

    I think the 200DMA moving average is a good example of a dumb rule that works for smart reasons. The key is that it understands that the market is a trend-friendly data series. Once things start moving in one direction, they tend to keep moving.

  • Aflac Reaffirms Guidance
    , May 19th, 2010 at 10:29 am

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    I’ve mentioned before that one of the great overlooked aspects of investing is when a company reaffirms its guidance. Most people shrug it off and think “big deal, no news.”
    But I like to see companies, especially ones I like, tell the investing public how they’re doing even if it’s simply to reaffirm previous guidance.
    Barron’s reports:

    Aflac management reaffirmed a forecast for $5.24 to $5.56 in earnings per share this year, Briefing.com reports, in line with Street estimates of $5.42, but said that range could shrink a bit at current exchange rates.
    Aflac also said its exposure to sovereign debt of the PIIGS — Portugal, Italy, Ireland, Greece and Spain — is $4.2 billion, which is higher than the $1.8 billion that Bloomberg reported as the company’s exposure back on April 28.
    Under current exchange rates, the company’s forecast range of $5.24 to $5.56 would narrow to $5.29 to $5.43, the company said.
    Within its sovereign risk exposure, the firm holds $286 million of Greek debt, and another $1 billion in exposure to Greek financial institutions.

    This is another good example of why I favor high-quality stocks. I can’t be sure of what’s in AFL’s portfolio so I need to place some trust in senior management. I never completely trust any company, but I have a much higher degree of faith in Aflac than I do most other stocks.

    The stock is now down to $44 a share which is absurdly low based on their earnings guidance (around eight times earnings).

  • Eaton Vance’s Earnings Report
    , May 19th, 2010 at 9:41 am

    This morning, Eaton Vance (EV) reported second-quarter earnings of 29 cents per share:

    Asset manager Eaton Vance Corp reported on Wednesday higher quarterly profit after customers added billions of dollars to its portfolios, helping boost assets under management by 39 percent.
    Net income climbed to $45.9 million, or 29 cents a share, during its fiscal second quarter ended April 30, up from $26.9 million or 21 cents a share a year earlier.
    The Boston-based company, known for its relatively conservative fund portfolios and a big issuer of closed-end funds, said revenue climbed to $273.0 million from $198.4 million.
    Investors added $5.3 billion into the company’s long-term funds and separate accounts, which helped boost total assets under management to $176.2 billion at the end of April.

    While the earnings report was good, it came in far below Wall Street’s expectations of 40 cents per share. The stock is down at the start of trading. Fortunately, Eaton Vance isn’t one of those stocks that lives or dies based on its quarterly numbers. I still like EV a lot.

  • Wednesday Morning News
    , May 19th, 2010 at 9:22 am

    Allen Stanford wants out of prison. He claims he’s been “savagely beaten.” Look dude, you’d get pretty much the same on the outside.
    Protesters Set Fire to Thai Stock Exchange

    Consumer Prices Fell 0.1% Last Month
    Deere Earnings Jump 16%, Raises Forecast
    SEC Proposes 10% Circuit Breaker for Every Stock. If you want to reduce volatility, then encourage larger dividend payments.
    House Passes Beer Resolution

  • Another Defeat for Efficient Markets
    , May 18th, 2010 at 3:19 pm

    It’s happening again. Bloomberg has a great article today about an ugly kick-back scheme involving CDR Financial Products.
    As a result, shares of the ticker symbol CDR are off sharply today. There’s one widdle problem. CDR is the ticker symbol for Cedar Shopping Centers which is a super-market REIT that has nothing at all to do with the Bloomberg article.
    (HT: TBI)

  • Thought for the Day
    , May 18th, 2010 at 1:48 pm

    From John Tierney’s review of “The Rational Optimist” by Matt Ridley:

    “Forget wars, religions, famines and poems for the moment,” Dr. Ridley writes. “This is history’s greatest theme: the metastasis of exchange, specialization and the invention it has called forth, the ‘creation’ of time.”

    (HT: Kedrosky)

  • First in Business Worldwide
    , May 18th, 2010 at 11:30 am