Author Archive

  • The S&P 500 Total Return Index
    , September 1st, 2011 at 2:08 pm

    Through August, the S&P 500 is down 3.08% for the year and the total return index, which includes dividends, is down 1.77%. Since August 2000, the Total Return Index is down 1.31%.

    Even though dividend yields are low, they do add up over time. Over the last five years, dividends have added 11.22% to your returns. That’s microscopic at even a monthly level, but it does slowly make a difference.

    If you pulled a Rip Van Winkle in early 1997 and started ignoring the market, only to wake up today, you probably wouldn’t be too surprised to learn where the market is. How it got there…well, that’s another story.

    By the way, the chart below begins in January 1997. Alan Greenspan made his famous Irrational Exuberance speech on December 5, 1996. I only have monthly data, so including all of December 1996, the total return of the S&P 500 is up 109% since then.

  • Nicholas Financial Extends Credit Line
    , September 1st, 2011 at 10:30 am

    Good news.

    CLEARWATER, Fla., Sept. 1, 2011 — Nicholas Financial, Inc., announced that the Company has executed an amendment to its Bank Credit Line that increases the size of the Credit Line from $140 million to $150 million and extends the maturity date to November 30, 2013. All other terms and conditions of the Company’s Credit Line remain in effect.

    According to Peter L. Vosotas, Chairman and CEO, “We are extremely pleased that our consortium of bank lenders has agreed to increase our Credit Line and extend the maturity date. The Credit Line increase will allow us to continue our expansion strategy during the next few years. The Company is very proud to continue its lending relationship with Bank of America which began in March of 1993 and also includes Wells Fargo Preferred Capital, Capital One Bank, First Horizon Bank, and Bank of Montreal as participating banks.”

  • August ISM = 50.6
    , September 1st, 2011 at 10:28 am

    On the first business day of each month, the ISM Manufacturing number comes out. This is the report that has been freaking people out recently.

    Let me explain: The break-even point for the ISM is 50. Any number above that indicates a growing economy; anything below 50 indicates a shrinking one.

    The ISM for April was 60.4 which is very high. That dropped to 53.5 for May. In June, it bumped up to 55.3. Then in July, the ISM dropped to 50.9.

    So there you have it: a clear downward trend to recession. Well, not exactly. Some folks were expecting today’s ISM report for August to continue the trend and hit the mid-40s. Instead, it seems to have stalled just above 50, which is perfectly fine.

    Historically, the odds of a recession shoot up when the ISM is below 45 and we’re still way above that. I ran the numbers and found that the ISM printed between 50.0 and 51.0 forty-nine times, and only three of those were official NBER recessions. In other words, there’s still no solid proof that a Double Dip is on the way. It may happen, but the numbers don’t yet show it.

    I keep harping on the “Fear Trade” but this is exactly what’s driving the markets. Notice that stocks turned higher when the ISM came out. So we rallied, not on good news, but simply because the bad news failed to show up. That tells you how fearful traders are.

    For now, it’s not so much that stocks are going up and bonds are going down, but they’re walking back the ground they unreasonably took over the last several weeks. This should continue.

  • Thank You!
    , September 1st, 2011 at 10:16 am

    We just finished a record traffic month here at Crossing Wall Street. So while the market was falling apart, folks were coming here!

    All told, we had over 84,000 visitors and 114,000 page views during the month of August. I want to thank everyone who came on by and I hope you become a regular visitor to our humble home.

  • Morning News: September 1, 2011
    , September 1st, 2011 at 5:21 am

    IMF, ECB at Odds Over Sovereign-Debt Damage to Banks, FT Says

    Euro-Zone Manufacturing Contracts

    China Shares End Down After Wen’s Comments, Higher August PMI

    BRICs No Cure for Global Economy This Time

    East Asian Bond Issuance Drops

    U.K. House Prices Decline Most in 10 Months

    London Loses as Banks Look to Book Trades Overseas

    Deutsche Telekom Unprepared for AT&T Deal Collapse

    In T-Mobile Suit, Consumers Are Central

    European Distilling Giant Pernod’s Earnings Get Boost From Emerging Markets

    Saab Auto Expects Big Loss

    Solar Firm Aided by Federal Loans Shuts Doors

    Sony Tablets Face Tough Sell on Price, Hardware

    Bank of New York Mellon Chief Resigns in a Shake-Up

    James Altucher: Abolish the Presidency. It’s a Useless Job.

    Stone Street: AT&T Bringing Call Center Jobs Back to The U.S. Hooray!!! Wait, What?

    Be sure to follow me on Twitter.

  • Another Look at the Fear Trade
    , August 31st, 2011 at 10:40 am

    The bulls are charging today. The S&P 500 broke through 1,230 this morning. Joey Bank ($JOSB) has been up as much as 12% today. This is a pretty stunning reversal from just a few days ago.

    Once again, stocks are up while bonds, gold and volatility are down. As I described before, this is the unwinding of the “Fear Trade” which gripped Wall Street this summer.

    Here’s a closer look at the Fear Trade:

    Notice how closely gold ($GLD) and bonds ($TLT) moved together and both moved in the opposite direction of stocks.

  • Jos. A Bank’s Blow-Out Quarter
    , August 31st, 2011 at 9:31 am

    The S&P 500 looks to open higher again today. I think the index has a good chance of breaking 1,220 today, the final trading day of the month. Frankly, August has been a terrible month for the market. We closed July at 1,292.28.

    Today could be the fourth up day in a row. I have to repeat myself from the other day. Imagine if this statement turned out to be true: “The sell-off ended three weeks ago and we’ve already gained back close to 40% of what we lost.”

    The big economic news this morning was the ADP report which showed that the economy created 91,000 private sector jobs in August. The government will release its employment numbers on Friday.

    Jos. A Bank Clothiers ($JOSB) reported outstanding second-quarter earnings this morning of 74 cents per share which was six cents more than estimates. Revenues were very strong, up 22.5% to $230.7 million. The consensus was $210.8 million so that’s a big beat. Same-store sales rose 14.7% and year-over-year direct marketing sales rose 27.8%.

    After the hiccup we saw for Q1, I can safely say that this was a very strong quarter.

    “With this quarter’s results, we have achieved earnings growth in 39 of the past 40 quarters when compared to the respective prior year periods, including 21 quarters in a row,” said R. Neal Black, the company’s president and CEO, in a statement. “While sales are just one component of overall profit and August is a relatively small sales month, our comparable store sales in August are up slightly compared to the same period last year, despite the impact of the recent hurricane.”

    The stock has gapped up 10% this morning.

  • Morning News: August 31, 2011
    , August 31st, 2011 at 6:15 am

    German Unemployment Falls as Hiring Holds Up

    Weak U.K. Confidence Raises Recession Fears

    European Inflation Holds Steady in August

    Nymex Crude Oil Steady; Below $89/Bbl; EIA Data Awaited

    Home Prices in U.S. Showed Signs of Stabilizing

    Fed Divisions Led to a Compromise on Interest Rates

    Toshiba, Hitachi, Sony Team Up in LCD Venture

    Exxon Wins Arctic Deal, Gives Russia U.S. Access

    French Retail Giant Carrefour Posts Loss, Cuts Forecast

    AT&T Vows to Bring Back 5,000 U.S. Jobs if Merger Approved

    Charities Struggle With Smaller Wall Street Donations

    Exercise Restraint to Prevent Premature Speculation

    How to Deflate a Gold Bubble (That Might Not Even Exist)

    Joshua Brown: Will Tomorrow’s Business Stars Come from Agriculture?

    Epicurean Dealmaker: Too Funky for Me

    Be sure to follow me on Twitter.

  • Donaldson Earns 84 Cents Per share
    , August 30th, 2011 at 2:41 pm

    I often tell investors not to worry about a stock once they’ve sold it, especially if they sell it for a profit. Of course, this is the advice that I most often don’t follow myself.

    At the end of 2009, I decided to drop Donaldson ($DCI) from my 2010 Buy List. I only switch five stocks each year. Donaldson is in the filtration biz. Exciting, I know, but it’s a wonderful company and I’m kicking myself for culling it from the Buy List.

    In 2010, DCI rallied for 38.5% (including dividends) and it’s up another 1.5% this year, which is still better than the overall market. Yesterday, the company reported Q4 earnings of 84 cents per share which was five cents better than estimates.

    For the year just ended, Donaldson earned $2.87 per share which was a nice jump over the $2.10 per share they made the year before. Donaldson also gave full-year 2012 guidance of $3.15 to $3.45 per share. That’s very wide but I expect it to be narrowed as the year goes on. I always prefer to have companies that provide guidance even if it’s far from exact.

    If we take the midpoint of the range ($3.30), DCI is going for 17.8 times earnings which is a bit rich for this market. Still, that’s what I thought in late 2009 and the stock has continued to outperform. If they keep beating expectations like they have been doing, Donaldson’s stock should see brighter days.

  • Nicholas Financial to Pay 10-Cent Dividend
    , August 30th, 2011 at 8:31 am

    Nicholas Financial ($NICK) just said that it’s paying a dividend:

    CLEARWATER, Fla., Aug 30, 2011 Nicholas Financial, Inc. announced today that its Board of Directors has declared a cash dividend of $.10 per share on its common stock, to be paid on September 20, 2011 to shareholders of record as of September 13, 2011.

    Peter L. Vosotas, Chairman and CEO noted, “Our capital position and continued confidence in our earnings capability played a large part in the Board of Director’s decision to declare a cash dividend.” Subject to market conditions and profitability targets, the Company anticipates it will continue to declare quarterly cash dividends in the future, however no assurances can be given. In the fiscal year ended March 31, 2011 we reported earnings of $1.41 per share. In the first quarter of our 2012 fiscal year which ended June 30, we reported earnings of $0.44 per share.

    All things being equal, I’d prefer they not pay a dividend, but I’m not strongly opposed to one, either.

    There are lots of things worse you can do with your money like share buybacks or lousy acquisitions. Ultimately, paying a dividend is a safe move. The important point is that NICK is very profitable. Ideally, I’d like to see them use every penny of cash flow to expand their business. However, the share price is very underpriced so I understand the board’s need to highlight why investing in NICK is a good thing to do.

    The best thing about a dividend is that each investor can decide if they want to purchase more shares of the company with their dividend. Nobody ever went to the poorhouse by cashing dividend checks.

    Since this is a quarterly dividend, it gives shares of NICK a yield of nearly 3.5%. That’s pretty rich and NICK will have no problem covering it.