Author Archive

• A Range-Bound Market
  Eddy Elfenbein, February 3rd, 2015 at 11:37 am

  This is starting to look like a range-bound market. Whenever the S&P 500 gets below 2,000, it soon rallies. Yet when it gets above 2,060 or so, the index suddenly gets nervous. Sixty of the last 63 closes have been between 1,990 and 2,090. That goes back to the beginning of November.

  

  Perhaps the most interesting change recently has been the surge in oil. Of course, this is really coming off a very deep bottom. West Texas Crude has rallied the last three days, and it looks like it will do so again today. The spot price is back above $50 per barrel. Energy stocks have also been doing well, but again, that’s after a painful fall. Interestingly, the recent uptick in oil has not been matched by a downtick in the dollar.

  

  We have two earnings reports due after the close, from AFLAC and Fiserv. Shares of Ford are having a nice day after a good sales report for January. Sales rose more than 15%, but remember that this is compared with a polar-vortexed January last year. Ford got as high as $15.79 today which it hasn’t seen in two months.

  Ford said its retail sales increased by 13 percent —the best retail sales month for Ford since 2004. The Dearborn automaker said passenger car sales to retail customers rose by 6 percent, utilities were up 10 percent and truck sales rose 23 percent.

  Ford sold 54,370 F-Series pickups last month, up 16.8 percent in January, marking the best January for F-Series since 2004. Lincoln brand sales also jumped 10.8 percent.

  I have to add that the plunge in earnings estimates is staggering. On September 30, the expectations for 2015 earnings for the S&P 500 were $136. That’s the index-adjusted number. By December 31, it was down to $131. Now it’s down to $120. For comparison, the S&P 500 probably earned about $114 last year up from $107 in 2013.

• The Stock Market Likes It Boring
  Eddy Elfenbein, February 3rd, 2015 at 9:25 am

  I was playing around with some market data and I found something interesting I wanted to pass along. It turns out that the really big gains from the stock market happen during the boring days.

  I took all of the daily closing figures for the S&P 500 from 1932 through 2014. I didn’t count Saturday trading which existed up until the 1950s. In total, I had more than 20,000 daily closes.

  Here’s what I found: The S&P 500 rose by more than 1.17% over 1,900 times (about 9.2% of the time), and it fell by more than 1.17% over 1,800 times (about 8.7% of the time). While the down days are fewer in number, they tend to be more severe. If we combine all the days with moves greater than 1.17%, it nets out almost perfectly to zero.

  In other words, all those high-volatility days add up to nothing. The market’s entire gain comes on days when the S&P 500 rises or falls less than 1.17%. The rest is just noise.

  What’s interesting is that many of those big up days come very near to those big down days. It’s almost as if bull and bear markets are illusions — there’s only a normal market with occasional brief but sharp panics. Even what appear to be long, secular bear markets see their worst pain concentrated within a short window.

• Morning News: February 3, 2015
  Eddy Elfenbein, February 3rd, 2015 at 6:57 am

  Greek Retreat on Writedown May Move Fight to Spending

  Erdogan’s Pressure on Basci for Rate Cut Shows No Sign of Letup

  Australian Dollar Skids to Six-year Low After RBA Shock

  RBI Rajan’s SLR Cut Won’t Boost Lending Now But It’s Reform for Long Term

  Apple’s Bond Sales Wave Red Flag on US Interest Rate Outlook

  As BP Shows, Corporate Profits Can Be Pretty Much Anything You Want Them To Be

  Alibaba and Lending Club Will Loan US Businesses $300,000 to Buy Chinese

  Exxon Mobil Revenue and Profit Off 21% on Oil Decline

  Disney to Push Back Shanghai Theme Park Opening to 2016

  Amazon in Talks to Buy Some of RadioShack’s Stores

  Japanese TV Makers Retreat From Overseas Markets

  Santander Profits Up on Branch Focus

  Lenovo’s Smartphone Challenge: Battling Apple, Xiaomi in China With Motorola

  Cullen Roche: Rand Paul’s Federal Reserve Goose Chase

  Jeff Carter: A Super Bowl Example of Leadership

  Be sure to follow me on Twitter.

• The Shake Shack IPO
  Eddy Elfenbein, February 2nd, 2015 at 5:18 pm

  Shares of Shake Shack ($SHAK) debuted on the market last week. The shares were priced at $21 and opened at $47. At one point, SHAK got as high as $52 per share.

  Investors often ask me about high-profile IPOs and I almost always encourage investors to avoid them. Remember that companies only go public if they think they can get a good price, so their interests are directly opposed to yours.

  It’s no surprise that most studies show that IPOs don’t perform well. A few big winners got all the attention.

  

  I honestly don’t see how Shake Shack is worth half this price.

• The S&P 500 Total Return Index
  Eddy Elfenbein, February 2nd, 2015 at 5:02 pm

  Here’s an updated look at the S&P 500 Total Return Index, meaning the S&P 500 plus dividends. Short version: It’s been a good six years but before that was…kinda rough.

  

• The Onion: Warren Buffett Can’t Believe He Has To Live Next To Powerball Winner
  Eddy Elfenbein, February 2nd, 2015 at 3:26 pm

  From The Onion:

  Warren Buffett Can’t Believe He Has To Live Next To Powerball Winner

  OMAHA, NE—Shaking his head as workers installed a fountain on his neighbor’s front lawn, business magnate Warren Buffett told reporters Wednesday that he cannot believe he’s stuck living next to the latest recipient of a Powerball jackpot. “Oh, what a treat, I get to be neighbors with some guy who walked into a gas station one day and asked a computer to pick six numbers,” said the multibillionaire investor, closing his window to avoid hearing the electronic dance music blasting from the $600 million prize winner’s poolside speaker system. “A Lamborghini, too? How original. I have no idea where this chump was living last week, but I give him one, two years tops before he blows it all and has to crawl back with his tail between his legs.” At press time, the so-called Oracle of Omaha was instructing his personal assistant to politely decline his neighbor’s invitation to go bison hunting together from his new helicopter.

• January ISM = 53.5
  Eddy Elfenbein, February 2nd, 2015 at 12:23 pm

  At mid-day, the stock market is holding on to some gains. As on Friday, oil is rebounding and that’s helping energy stocks. The Energy Sector ETF (XLF) is doing well again today. It’s had a rough few months.

  This morning’s ISM report for January came in at 53.5 which is a bit on the light side. That’s down from 55.1 in December.

  The Census Bureau said that construction spending rose by 0.4% in December. We also learned that personal income rose by 0.3% in December while personal spending fell by the same amount. For all of 2014, personal spending rose by 2.4%. That’s the strongest growth since 2006. The PCE price index rose 0.7% over the last 12 months.

• Morning News: February 2, 2015
  Eddy Elfenbein, February 2nd, 2015 at 7:08 am

  Germany Stands to Be Big Winner of Much-Opposed ECB Stimulus

  ECB Bond-Buying Plan Has Investors Questioning How It Works

  China Jan HSBC Factory PMI Contracts For Second Month, Misses Flash Estimate

  China’s Latest Corruption Probe Could Spell Trouble for the Global Banking Industry

  Justice Department Investigating Moody’s Investors Service

  Settling Case, Standard & Poor’s Backs Off Claims of Government ‘Retaliation’

  Oil Futures Swing Higher, Briefly Recapture $50 a Barrel

  Obama Proposes $3.99 Trillion Budget, Sets Up Battle With Republicans

  Swiss Bank Julius Baer to Cut About 200 Jobs in Cost Saving Drive

  Are Changing American Tastes Slowing McDonald’s Down?

  Hard-Charging Uber Tries Olive Branch

  How We’re Spending Our Windfall From Cheap Gas

  For French Investors, Euro Disney Nightmare

  Jeff Miller: Weighing the Week Ahead: Will the Data Deluge Signal Economic Weakness?

  Edward Harrison: Why Quantitative Easing and Negative Interest Rates Will Fail

  Be sure to follow me on Twitter.

• The S&P 500 Nears Its 200-DMA
  Eddy Elfenbein, January 30th, 2015 at 9:17 am

  The S&P 500 reached its all-time intra-day peak of 2,093.55 on December 29.

  A 5% drop would take the index to 1988.87. The S&P 500 has reached three recent intra-day lows: on January 14, then on January 16 and again yesterday. Those lows were, in order, 1,988.44, 1,988.12 and 1,989.18. Eerily close. Still, the S&P 500 has not yet closed at a 5% loss, but it’s gotten close.

  The S&P 500 is also getting close to its 200-day moving average. Going by yesterday’s close, the 200-DMA is now 1,973.85.

  

• GDP Grew 2.6% in Q4
  Eddy Elfenbein, January 30th, 2015 at 8:52 am

  The government just reported that the economy grew at a 2.6% rate in Q4. Honestly, that’s not that great. But considering that Q2 and Q3 were pretty good, it’s nice to see us not give it all back. In fact, the last three quarters were the best for real GDP growth since the last two quarters of 2003 and Q1 of 2004.

  Here’s a look at the trailing three-quarter growth rate (not annualized):

  

  We’re somewhat back to normal! Interestingly, nominal GDP grew by 2.54%, a bit less than RGDP. That’s what deflation does.

  For the year, RGDP grew by 2.42% which was our best showing since 2010.

  We need the last three quarters to repeat themselves for another four years, and inflation to return to 2%. That would be very good.