Author Archive

  • Q2 GDP Revised Higher to 3.7%
    , August 27th, 2015 at 11:37 am

    The second-quarter GDP was revised higher today to 3.7%. That’s a revision from the initial report of 2.3% growth. This probably helped calmed the market’s nerves.

    I now feel a bit vindicated. Before the initial report on Q2 GDP came out, I said I was expecting a good number, “perhaps 3.0% to 3.5%.”

    This was the fourth-best quarter for GDP growth since the start of 2012.

  • Morning News: August 27, 2015
    , August 27th, 2015 at 7:09 am

    Yen Nurses Losses as Stocks Rally Cheers Mood, Dollar Eyes Data

    China Billionaire Wang Jianlin Says Drop Growth Targets

    China Falters, and the Global Economy is Forced to Adapt

    Ukraine Agrees on Plan to Restructure $18 Billion of Foreign Debt

    Oil Industry Needs Half a Trillion Dollars to Endure Price Slump

    In Cameron Deal, Schlumberger Is Betting On A Deepwater Resurgence

    Amazon to Launch Video Streaming Service in Japan

    Medical-Device Company Greatbatch to Buy Lake Region Medical for $730 Million

    Intel Invests $60 Million in Chinese Drone Maker Yuneec

    Walmart to End Sales of Assault-Style Rifles in U.S. Stores

    Free Tuna Being Offered After StarKist Settles Lawsuit

    Tesla With ‘Insane Mode’ Busts Curve on Consumer Reports Ratings

    Heard of China’s Fake Rolexes? Now There’s a Fake Goldman Sachs

    Cullen Roche: The USA’s Debt “Supercycle” Ended in 2007….

    Roger Nusbaum: Stop Orders: Vestige of a Bygone Era?

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  • The Dow Jumps 619 Points
    , August 26th, 2015 at 4:41 pm

    The Dow rose 619 points today for its third-largest point gain in history. The other two came days apart in October 2008. In percentage terms, today’s 3.95% gain was the 131st largest since 1900.

    The S&P 500 rose 72.90 points to close at 1940.51. That’s a gain of 3.90%. The S&P 500’s point gain today was greater than what the entire index was going for in January 1975.

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    Today was very much a “high beta” day. Tech and energy stocks were the strongest. Growth also led value. Less than 30% of the stocks in the S&P 500 outperformed the S&P 500 today.

    Bespoke Investment Group noted that the S&P 500 closed four standard deviations below its 50-day moving average for three straight sessions. That’s only happened twice since May 1940, when France fell to the Germans. Ironically, the S&P 500 closed today at 1,940.51.

    Our Buy List gained 3.38% today which trailed the market, but our stocks are generally more conservative. Fiserv, Microsoft, Cognizant and Qualcomm all rose more than 5% today.

    Today was a very good day, but the market is still very unsettled. You can expect more volatility. I don’t think we’ll be in the clear until the VIX closes below 20.

  • Dudley: September Hike Less Compelling
    , August 26th, 2015 at 11:40 am

    William Dudley, the head of the NY Fed, said this morning that a rate hike next month is less compelling. I think the market is reading too much into this news.

    The last few days have been a market event, not an economic one. I don’t believe the Fed is any less persuaded that it will raise rates soon. I’ve given up on predicting exactly when this will happen, but we know it will happen soon.

    If you look at Dudley’s full remarks he clearly says that the data is getting better, not worse. This is not the kind of mini-panic where the Fed can rescue us.

    Here’s a look at the six-month Treasury, which is one of the better charts to get a sense of higher rates.

    big08262015

    The yield has climbed this year as the Fed has hinted that a rate hike is coming. The yield has dipped a little in the past few months, but not that much.

  • Durable Goods Rise 2%
    , August 26th, 2015 at 10:54 am

    It’s hard to provide meaningful updates in this market. Everything is moving so quickly as we saw in the final hour of yesterday.

    The market is up again this morning. But the rally seems more cautious and we’ve already slipped back a bit.

    So far, the financial rout seems unrelated to the economy. This morning, in fact, we got news that durable goods rose 2% last month. That comes after a 4.1% increase in June.

    Orders in a category that serves as a proxy for business investment expanded 2.2 percent in July following a 1.4 percent rise in June. These orders had fallen in four of the previous five months, reflecting the soft patch that manufacturing has faced this year.

    Ian Shepherdson, chief economist at Pantheon Macroeconomics, called the 2.2 percent gain in the business investment category “really good news.” He said the strong gain was a solid indication that the big cutbacks in investment spending by oil companies were starting to taper off.

    While the July increase is encouraging, U.S. manufacturers still face a host of problems from a stronger dollar to falling oil prices and turbulence in China, the world’s second biggest economy.

    The higher value of the dollar against foreign currencies makes U.S. goods more expensive and less competitive in major export markets. The lower oil prices have led energy companies to scale back their investment plans.

  • Morning News: August 26, 2015
    , August 26th, 2015 at 6:46 am

    Chinese Authorities Escalate Blame Game

    Many Chinese Investors Nonchalant About Stock Market Plunge

    Emerging Market Assets Weaken Again Despite China’s Rate Cut

    European Shares Fall Back, Banks and Commodities Underperform

    Currency Volatility Upsets Asian Growth Plans

    Why Market Turmoil Won’t Prevent the Federal Reserve From Raising Interest Rates

    Oil Futures Crash No Help to Sellers of the Real Thing

    Puerto Rico Turmoil Sinks Sewer Bond

    Schlumberger to Buy Cameron in $14.8 Billion Deal

    E.ON Targets United States in Solar Push

    Under Armour Seeks to Do For Maryland What Nike Did For Oregon

    The One-Man, $1.2 Billion ETF Shop

    How Wall Street Is Losing Talent to Cleveland

    Jeff Miller: What Investors Must Know About China

    Jeff Carter: Who Understands the Market?

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  • The Rally Collapses
    , August 25th, 2015 at 4:58 pm

    Another tough day. The stock market appeared to be getting better. In fact, the S&P 500 got as high as 1,948. As late as 3 pm, it was at 1,927.

    But things fell apart in the last hour. The S&P 500 plunged 60 points in the last 60 minutes to close at 1,867.61. The index is now just above yesterday’s low. As ugly as yesterday’s open was, we’re basically right back there.

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    For the day, the S&P 500 lost 1.35%. That’s actually the best day in the last four. Our Buy List fell 1.40%.

  • After the Storm
    , August 25th, 2015 at 12:53 pm

    The stock market has calmed down considerably today. The Dow has been up as much as 441 points. The S&P 500 is currently up 2.32%.

    The rally today is different from yesterday’s selloff in that the “high beta” areas, tech in particular, are doing quite well. The Utility ETF (XLU) is down while the Tech ETF (XLK) is up more than 3%. Growth is well ahead of Value. Yesterday’s selloff was much broader.

    While the market is calmer today, I urge investors to expect more volatility in the days ahead. There’s the reaction, then the counter-reaction, then the reaction to that. The big low often comes a little bit after the worst of the panic passes.

  • Remembrances of Jackson Holes Past
    , August 25th, 2015 at 9:54 am

    On Thursday, the Federal Reserve will be holding another big meeting in Jackson Hole, Wyoming. Janet Yellen will be skipping this year’s meeting, but it’s still going to get a lot of attention.

    Gary Alexander of Naveller Marketmail points out that the market has often reacted well after Jackson Hole.

    Jackson Hole has become an annual rallying point for the stock market over the last few years. Since 2009, the market has responded favorably whenever some real news comes out of Jackson Hole. From 2010 to 2013, Federal Reserve Chairman Ben Bernanke made monetary history at Jackson Hole. He often announced (or paved the way for) a major Fed policy change at this time. Here’s a brief summary:

    The 2010 Jackson Hole conference was held August 26-28. In his August 27 talk, Mr. Bernanke said that the pace of economic growth had been “less vigorous” than the Fed was expecting and the pace of the U.S. job growth was “painfully” slow. He also acknowledged that the Fed was surprised by the “sharp deterioration” in the U.S. trade balance. His solution was to revive the Fed’s late-2008 “quantitative easing” (QE) scheme. The market loved QE2: The S&P rose from 1040 on the day of Bernanke’s Jackson Hole talk to 1363.6 the following April – up 31%.

    The 2011 Jackson Hole conference was held August 25-27, during an especially volatile month in market history. At Jackson Hole, Chairman Bernanke laid out the groundwork for another new Fed monetary strategy called “Operation Twist.” The detailed plan was not officially announced until September 21, but over the next month or so, various Fed governors hit the road to explain and defend their $400 billion operation to artificially flatten the yield curve. The stock market loved Operation Twist. The S&P 500 rose over 26% from August 2011 to April of 2012.

    The 2012 Jackson Hole conference, held August 30 to September 1, laid the groundwork for QE3, which was officially launched on September 13. Bernanke’s Jackson Hole remarks were more frank than usual. First, he said that the stagnant job market was a “grave concern” to the Fed. He also called current economic growth “far from satisfactory” and “tepid.” Because of this slow growth, Bernanke said that the Fed will “provide additional policy accommodation as needed.” This was a broad hint that more easing (dubbed QE3) would soon follow. The market seemed to love QE3, as the S&P 500 rose by over 17% from its August lows to April of 2013.

    The 2013 Jackson Hole conference was held August 22-24. By then, Chairman Bernanke was a lame duck, so he let his replacement (Janet Yellen) speak in his place. Strangely, she did not say much, except as part of a panel. Since the skies were smoky around Jackson Hole, due to all of the fires in Idaho, the inside joke was that Jackson Hole’s skies reflected the foggy future of the Fed, especially since Bernanke’s hints of “tapering” (uttered in May) were spooking the markets. In the end, tapering failed to faze the market, with the S&P 500 rising 16% by April of 2014.

    Last August (2014), as noted above, Ms. Yellen tried to reassure investors that the Fed might not raise rates as soon as they expect and the market managed to eke out an 11.6% gain by May 2015.

  • Futures Point Higher
    , August 25th, 2015 at 8:24 am

    We’re not out of the woods just yet, but the futures are indicating that today will be a very good day for stocks. The Dow futures are up 530 points. The S&P 500 futures are up 61.75 to 1,933 from a gain of 3.3%.