Archive for April, 2009

  • The Geography of Jobs
    , April 30th, 2009 at 12:20 pm

    Cool graphic on jobs.

  • S&P 500 Heads for Best Month in 17 Years
    , April 30th, 2009 at 11:07 am

    Since the March 9th closing low of 676.53, the S&P 500 has tacked on 29% through yesterday and we’ll probably make it to 31% with today’s gain. (BTW, the intra-day low was 666! AH AH AH AH AH!)
    This will probably be the best month of the S&P 500 since December 1991. The index is still underwater for the year, but our Buy List is up 8.5% for the year and we’re now running 10% ahead of the market.

  • AFLAC’s Earnings Jump 20%
    , April 30th, 2009 at 9:59 am

    It’s been a tough year for Aflac’s (AFL) stock, but the company is still delivering on earnings. At one point, the stock was going for about two times this year’s estimate. Now that’s a scared market!
    Now we have some results to look at. First-quarter net came in at $1.22 a share, six cents more than consensus. For last year’s Q1, AFL earned 98 cents. So they’re growing, there’s no doubt about that. With Aflac’s cash flow, there’s no need for them to dump any holdings at whatever price they can get.
    Wall Street got itself freaked out because Aflac had investments in these “hybrid securities” in a lot of bum European banks. The company has said there’s nothing to worry about. Wall Street, however, is still very clearly worried.

    Shareholders equity, a measure of assets minus liabilities, fell 21 percent to $5.2 billion as of March 31 from $6.6 billion at the end of 2008 on the declining value of holdings. The net unrealized loss on investments widened to $3 billion compared with $1.2 billion three months earlier. Unrealized losses, which don’t count against earnings, are monitored by ratings firms, regulators and investors as a measure of financial strength.
    North American insurers posted more than $190 billion of writedowns and unrealized losses tied to the collapse of the mortgage market since the beginning of 2007, with Aflac accounting for $3.6 billion through the end of last year.
    Aflac, whose policies supplement work and government- sponsored health-insurance plans, holds hybrid securities in 38 issuers spread across 15 countries across Europe and in Japan and Australia, Aflac said in February. About 20 percent of the portfolio is in the U.K., Aflac said.
    In Japan, Aflac’s biggest market, the company sold new policies worth 27.5 billion yen ($293 million) falling from $264 million in the same period a year earlier. Premium income rose to $3 billion in the quarter from $2.6 billion as the yen strengthened against the dollar a year earlier.
    U.S. sales of new policies fell to $351 million from $353 million first quarter of 2008, Aflac said in its statement.

    As far as future guidance, the company expects 2009 operating EPS to grow at the low end of their 13% to 15% target, which translates to about $4.51 a share. That means the stock is trading at 6.6 times forward earnings. Of course, movements in the yen can affect things a lot. For Q2, Aflac sees operating EPS ranging for $1.11 to $1.14. At the current price, the stock yields 4.1%. As today’s report shows, Aflac is an excellent stock to own.

  • Today’s Fed Statement
    , April 29th, 2009 at 2:20 pm

    Just released:

    Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower. Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment, and staffing. Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time. Nonetheless, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.
    In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.
    In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is facilitating the extension of credit to households and businesses and supporting the functioning of financial markets through a range of liquidity programs. The Committee will continue to carefully monitor the size and composition of the Federal Reserve’s balance sheet in light of financial and economic developments.
    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

  • S&P 500 and Earnings
    , April 28th, 2009 at 3:28 pm

    Here’s a look at the S&P 500 (black line, left scale) over the last few years with its earnings (gold line, right scale).
    The two lines are scaled at 16 to 1, meaning when the lines cross the market’s P/E ratio is 16. I used 16 because it seems that the market has tracked that fairly well for the past few years. This market top wasn’t marked by outrageous earnings multiples. The values were fine it was the fundamentals that were shaky.
    Two points to note. I used to operating earnings. That seems to get some people bent out of shape but it’s a much better tool for looking at the market as a whole. Also, AIG’s massive loss took out $5.13 from earnings in Q4, so that distorts the picture a little.

  • Poll Update
    , April 28th, 2009 at 1:44 pm

    Thanks to everyone who participated in our last poll.
    With over 200 votes cast, the median seems to be squarely in the 20% to 25% bracket. There’s almost exactly the same number of votes above as there is below.
    I realize that the “framing” of brackets answers probably violates every law of polling. Still, I was curious to see what my readers thought.
    I’m surprised by how high the result is. A rate of 22% or 23% is fairly high compared with current law. I would have assumed CWS readers were a strong anti-lot.

  • Early Stress Test Results
    , April 28th, 2009 at 11:01 am

    I don’t want to sound unappreciative, but if this is what the stress test is about, wouldn’t it have been a lot easier to look at the stock prices? “If you’re stock is down by over 90%, please step forward.” You know, wisdom of crowds and all that.
    They could have asked me to do the stress test. I would have done for a lot less money.
    PS I’ll give you one for free. GM is in bad shape.

  • Great News! Rate of Plunge In Home Value Slowing
    , April 28th, 2009 at 10:59 am

    I feel richer already:

    Home Prices in 20 U.S. Cities Declined at Slower Pace
    The decline in home prices in 20 major U.S. cities slowed in February for the first time since 2007, amplifying signals that the market may be stabilizing.
    The S&P/Case-Shiller index’s 18.6 percent decrease compares with a record 19 percent decline the month before. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.
    Declining prices, Federal Reserve efforts to bring mortgage rates down, and government tax credits for first-time buyers may continue to support sales after an almost four-year slide. Still, mounting unemployment means purchases are unlikely to rebound quickly.
    “We’re probably getting close to an inflection point,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York, who correctly forecast the drop in the index. Still, he said, “if we are indeed going to see a recovery in the second half,” the double-digit price drops will need to abate in the next few months.

  • Super-rich ravaged by recession
    , April 28th, 2009 at 10:51 am

    Here’s an interesting story I think we’re going to see more of:

    Britain’s richest people lost 155 billion pounds in the past year because of a deep recession and the global financial crisis, a survey showed on Sunday.
    The Sunday Times newspaper’s 2009 Rich List, featuring the thousand wealthiest people based in Britain, also found the number of billionaires sank from 75 to 43 people in the last 12 months as the credit crunch took its toll.
    The country’s 1,000 richest people have a collective fortune of 258 billion pounds, according to the weekly newspaper. That compared with a record 413 billion pounds in last year’s survey.
    “I am beyond being surprised, except by the scale of the devastation,” said Philip Beresford, who has compiled the annual list since 1989.
    “It is extraordinary how people have seen their fortunes being whittled away. It is devastation all round.”

    Not all recessions are the same. Each has a particular slant to it and I think our current unpleasantness can be described as a Depression for the Ultra-Rich.
    One of the fall outs for this will be on government finances. Our tax code has followed income inequality. As a result, millions of Americans have been removed from the tax rolls while lower marginal rates have been offset growth the rising income of the very wealthy.
    Now we’re at a reckoning because it’s those upper incomes that are feeling the heat and the rest of the country no longer faces much of a tax burden. I believe that half of NYC’s taxes are paid by just 40,000 households. Well, they’re not going to have a good year this year. Just as the tech bust lead to the California recall, I wonder if the implosion of Wall Street will lead to similar political actions.
    Today we learn:

    New York City’s net personal income tax revenues plunged 51 percent in the first 24 days of April, compared with the same period a year ago, the city comptroller’s office said on Monday.

  • Becton Dickinson Beats By Two Cents
    , April 28th, 2009 at 10:11 am

    Profits were down and sales were flat:

    Medical-device maker Becton Dickinson and Co. said Tuesday its fiscal second-quarter profit fell 5.4 percent on a legal charge and lower sales.
    For the quarter ended March 31, Becton Dickinson earned $261.3 million, or $1.06 per share, down from $276.2 million, or $1.09 per share, a year earlier. Revenue fell less than 1 percent to $1.74 billion from $1.75 billion.
    Excluding legal charges to settle an antitrust case, the company said it earned $1.18 per share. Analysts polled by Thomson Reuters expected profit of $1.16 per share on revenue of $1.76 billion.
    Sales in the company’s medical segment fell 3 percent to $897 million while sales in the diagnostics segment rose 2 percent to $540 million. Biosciences unit sales rose 3 percent to $304 million. Overall U.S. sales fell 1 percent and foreign sales were flat as the stronger U.S. dollar cut into those markets.
    The company reaffirmed its full-year outlook for an earnings-per-share boost of 9 percent to 11 percent. Based on the company’s 2008 earnings from continuing operations of $4.46 per share, the guidance projects a 2009 profit of $4.86 to $4.95 per share. Analysts polled expect a 2009 profit of $4.94 per share.