Archive for April, 2013

  • S&P 500 = 1,597
    , April 30th, 2013 at 10:39 pm

    April is officially on the books. Today was the 16th-straight Tuesday rally for the Dow. The S&P 500 closed today at 1,597.57 which is another all-time high close. The index is now up 12.02% for the year, and including dividends, it’s up 12.74%.

    However, the index is still very far from an inflation-adjusted new high. On March 23rd, 2000, the S&P 500 closed at 1,527.35. It actually rose 0.11 the next day but that little gain was just slightly below the inflation rate for March.

    We don’t have the inflation numbers yet for April, but if we assume an inflation rate of 0.1%, the S&P 500 would have to be 2,083.15 to match the inflation-adjusted high from 13 years ago. That’s another 30.4% from here.

  • Fiserv Earned $1.33 per Share for Q1
    , April 30th, 2013 at 4:31 pm

    Fiserv just reported first-quarter earnings of $1.33 per share which was one penny below consensus. For Q1 last year, the company made $1.15 per share. Fiserv’s CEO, Jeffery Yabuki, said the company is “on-track to achieve our targeted results for the year.”

    For the entire year, Fiserv expects adjusted revenue growth in excess of 10%, and earnings-per-share are expected to rise between 15% and 19% to a range of $5.84 to $6.03. The Street had been expecting $5.97 per share.

    The stock is down a bit in after-hours trading but there’s nothing surprising in this report. This is exactly what we expect of Fiserv.

  • Sell in May: What’s the Historical Record?
    , April 30th, 2013 at 12:10 pm

    Today is the last day of April. Believe it or not, we’re already one-third of our way through this decade. It’s at this time of year we often hear the old Wall Street adage, “sell in May and go away.”

    I recently crunched the data on the Dow’s historical returns — and by that, I mean every single day for the last 117 years since the index was born. I looked over the numbers and it turns out that the Dow has performed rather poorly from early-May through late-October.


    Specifically, from May 6th to October 29th, the Dow has gained, on average, only 0.3%. That’s just shy of half the year (176 days to be exact). For the other half, the Dow has gained an average of 6.96%.

    Just to be clear, these numbers don’t include dividends. Also, I don’t believe there’s any advantage for investors in trading around these events. I just think it’s fascinating that after 117 years, some definite patterns have evolved.

  • Facebook Is Hemorrhaging Users
    , April 30th, 2013 at 9:59 am

    I haven’t been a fan of Facebook‘s ($FB) stock. Now there’s evidence that Facebook has been losing millions of users. It turns out that FB is just not cool anymore:

    Facebook has lost millions of users per month in its biggest markets, independent data suggests, as alternative social networks attract the attention of those looking for fresh online playgrounds.

    As Facebook prepares to update investors on its performance in the first three months of the year, with analysts forecasting revenues up 36% on last year, studies suggest that its expansion in the US, UK and other major European countries has peaked.

    In the last month, the world’s largest social network has lost 6m US visitors, a 4% fall, according to analysis firm SocialBakers. In the UK, 1.4m fewer users checked in last month, a fall of 4.5%. The declines are sustained. In the last six months, Facebook has lost nearly 9m monthly visitors in the US and 2m in the UK.

    Users are also switching off in Canada, Spain, France, Germany and Japan, where Facebook has some of its biggest followings. A spokeswoman for Facebook declined to comment.

    “The problem is that, in the US and UK, most people who want to sign up for Facebook have already done it,” said new media specialist Ian Maude at Enders Analysis. “There is a boredom factor where people like to try something new. Is Facebook going to go the way of Myspace? The risk is relatively small, but that is not to say it isn’t there.”

    Facebook is due to report earnings tomorrow. Wall Street currently expects FB to earn 57 cents per share this year (down from 66 cents per share three months ago) and 78 cents per share in 2014 (down from 87 cents per share three months ago).

    I think Facebook will continue to be profitable. To me, the big issue is the rapid growth that people expect. If the stock is going for 47 times this year’s earnings, that means the market expects very strong growth for years to come. I’m not sure that will come.

  • Harris Earns $1.12 Per Share
    , April 30th, 2013 at 8:30 am

    This morning, Harris ($HRS) reported fiscal third-quarter earnings of $1.12 per share which was inline with expectations. As the company warned us, the sequester is putting the squeeze on them. Those issues aside, the business fundamentals are strong.

    “Third quarter results were in line with our preliminary release issued April 11 and weaker than previously expected primarily due to U.S. and international tactical radio procurement delays,” said William M. Brown, president and chief executive officer. “U.S. Government funding constraints resulting from the continuing resolution were magnified when sequestration was triggered. Additionally, in the international market several key tactical radio orders have been pushed to later in the year or early next fiscal year.”

    “We recently announced company-wide restructuring actions that are expected to generate net annualized cost savings of approximately $40 to $50 million. These cost savings, combined with benefits from our ongoing focus on operational excellence and reduced discretionary spending, will allow us to be successful in a challenging government market environment while continuing to invest in R&D and fund strategic growth initiatives.”

    Harris reiterated its full-year guidance of $4.60 to $4.70 per share.

  • Morning News: April 30, 2013
    , April 30th, 2013 at 7:30 am

    Lloyds’ Profit Surges to $2.3 Billion

    UBS Records $1 Billion First Quarter Profit

    BNP Paribas Like SocGen Braces for French Eldorado End

    NYSE Euronext Sees Pick-Up In European Derivatives Trading

    Treasury Expects To Pay Down Debt For The First Time In 6 Years, Thanks To Austerity

    Consumer Spending Rises, Driven By Utility Costs

    BP’s $4.2 Billion Profit Beats Forecasts

    AB InBev Cuts Brazil Beer Forecast After Profit Misses Estimates

    Chrysler Hits a Pothole Over Retooling

    Carphone Warehouse Group PLC Proposed Acquisition and Q4 Trading Update

    ANA Holdings Group Net Profit Rises 53.1%

    Alibaba Steps Up Tencent Battle with Stake in Weibo

    Japan’s SoftBank Says No Need To Improve Sprint Offer

    Jeff Carter: Startups and Small Business

    Joshua Brown: Five Reasons I’m Not Worried About a Canadian Housing Bubble

    Be sure to follow me on Twitter.

  • How Closely Tied Are the Stock Market and the Economy?
    , April 29th, 2013 at 12:33 pm

    We often speak of the stock market and economy as if they’re closely tied together. The evidence suggests they’re not.

    For one, the stock market follows corporate profits which is only a small part of the overall economy. Secondly, the stock market tries to look ahead in time. That’s why the best time to invest is when things look terrible. Consider how glum everyone was four years ago.

    Here’s a look at quarterly changes in GDP (horizontal) along with quarterly changes in the S&P 500 (vertical). To me, it looks like one big mess.


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  • Nominal GDP Continues to Track 4% Growth
    , April 29th, 2013 at 11:57 am

    There’s a growing movement calling for the Federal Reserve to track a regular increase of nominal (including inflation) GDP. The number 5% is most frequently cited.

    What these proponents say is that the Fed should draw a 5% trendline. If nominal GDP drops below that trendline, they ought to loosen monetary policy. If it’s above 5%, they ought to tighten.

    What’s interesting is how closely nominal GDP has tracked a 5% growth trendline over the last 14 quarters. Not only is it close, I doubt the Fed could have done a better job if it had tried.

    The blue line is nominal GDP and the black line is a 4% trendline.


  • Six Straight Up Months for the S&P 500
    , April 29th, 2013 at 11:36 am

    You’d never know this by reading a lot of financial commentary but the S&P 500 is about to close out its sixth-straight monthly gain. The latest numbers show that 273 of the 500 companies in the S&P 500 have reported earnings so far. Of those, 74% have beaten earnings expectations but 55% have missed sales expectations.

    The government reported that personal income rose 0.2% last month. Personal spending was also up 0.2% in March, but that’s down from the big 0.7% rise in February. The next big report will be Friday’s jobs report. Economists forecast that the U.S. economy created 153,000 jobs last month.

    The stock market is doing well this morning. The S&P 500 has been as high as 1,592 which is very close to an all-time high. I should also the note the impressive rally in bonds. On March 15th, the 10-year Treasury yielded 2% exactly. Today it’s down to 1.66%.

    Shares of AFLAC ($AFL) got as high as $53.95 today. The stock was last above $54 in February.

  • Man Retires at 30; He Lives More with Less
    , April 29th, 2013 at 10:39 am

    The Washington Post has a fascinating interview with a man who retired at the age of 30, not due to extreme wealth but due to living with less. Instead of being unfulfilled, the living-with-less philosophy has made him “ridiculously happy.”

    You may find his choices unusual, but I truly admire anyone who is willing to live their life on their own terms. I think if anyone were to observe the lives of most middle-class Americans in a perfectly detached way, they would be shocked by how much wasteful spending there is.

    Here’s a sample from the interview:

    You describe the typical middle-class life as an “exploding volcano of wastefulness.” Seems like lots of personal finance folks obsess about lattes. Are you just talking about the lattes here?

    The latte is just the foamy figurehead of an entire spectrum of sloppy “I deserve it” luxury spending that consumes most of our gross domestic product these days. Among my favorite targets: commuting to an office job in an F-150 pickup truck, anything involving a drive-through, paying $100 per month for the privilege of wasting four hours a night watching cable TV and the whole yoga industry. There are better, and free, ways to meet these needs, but everyone always chooses the expensive ones and then complains that life is hard these days.